5 Things Not to Worry About with Investing
I don’t know if there are any studies on this, but my guess is that investing causes more stress than all other financial topics combined.
Between the confusing jargon, the endless list of mutual funds, ETFs, and retirement accounts to choose from, and the constant ups and downs of the market, it’s easy to feel overwhelmed, confused, and downright anxious about whether you’re making the right decisions and whether you’ll be okay.
But today I’d like to give you a little relief. Because there are a lot of things you shouldn’t be worrying about when it comes to your investments, and here are five of the biggest.
1. What the Stock Market Has Done Recently
The US stock market dropped 24.63% over the first 68 days of 2009 in the midst of the housing crisis and international financial meltdown. Bad sign, right? Sure, except that the total return for the year ended up being a positive 29%.
Or how about the two years from September 1998 to August 2000 when the US stock market increased by 25% per year, only to decrease by 21% per year over the next two years.
In other words, you shouldn’t spend any time worrying about what the stock market has done recently because it doesn’t in any way predict what it will do going forward.
2. What "Experts" Think the Stock Market Is Going to Do Next
Did you know that active investment managers underperform basic index funds year after year? Or that “expert” prognosticators are wrong more often than they’re right?
Even the experts have no idea what the stock market is going to do next. The less you pay attention to their predictions, the calmer you’ll feel and the more likely you’ll be to succeed.
3. What Your Friends Are Investing In
It’s pretty easy to read a little bit about something, repeat it to your friends or family, and sound like you know what you’re talking about. I’ve done it. You’ve done it. We’ve all done it.
So the next time you hear someone talking about how they’re investing, remind yourself of the following three things:
- They may or may not know more about investing than you do.
- They definitely don’t know about your personal investment goals and the right way to reach them.
- Therefore, what they’re saying is completely irrelevant to your investment plan and you can safely ignore it.
4. How Exciting It Is
Nobel Prize-winning economist Paul Samuelson is famous for saying that “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Good investing is actually pretty boring. You put a strategy in place, contribute to it for decades at a time, and stick with it through the ups and downs.
It’s not exciting, but it's prudent.
5. Whether You Have the Perfect Investment Strategy
We all have that nagging suspicion that we could improve our investment strategy, even just by a little bit. I have it to from time to time.
But here’s the thing: there is no perfect investment strategy because no one knows what the markets will do in the future. Lots of people have ideas, but no one knows for sure.
So stop worrying about whether you could tweak your investment strategy to get it exactly right. Work on making it good enough and get on with your life.
Don't Sweat the Small Stuff
There’s a lot you could worry about when it comes to investing, but you can cross the five things above off your list.
Hopefully that makes it easier to focus on what really matters.