“Don’t miss the donut by looking through the hole.”
— Author Unknown
Many investors prefer access to plenty of information as they seek to achieve their goals, typically funding for retirement. Some even want a deluge of information. I thought it was instructive to have a closer look at this investing approach.
For example, last week investors were treated to making sense of 19 major economic data releases, such as jobs, factory orders and consumer credit. This week that number drops to a mere 15 releases, followed by another 17 and 15 for the next two weeks. And that list just covers the US economy! Heaven help those who also feel like tracking China, Japan or Europe.
More data will soon be on its way with the release of quarterly earnings and future prospects for a bevy of companies. If this feels like taking on a herculean task, you are right. So, let’s deal with the key question: “Do you allow the volumes of daily noise to influence your investing?”
First a candid observation. Investors are very keen to find facts, figures, data, trends, people, information and institutions that agree with their existing views. Then they proceed to ignore all the other people and data that contradict their beliefs and positions. This is commonly known as “confirmation bias”.
Few investors have the courage to disregard the massive daily volumes of research, predictions, data and advice readily available from many sources. Those savvy investors know it’s best not to react to short term distractions coming their way each and every day. Call it market noise, especially, during large market swings.
So, let’s deal with the key question: ‘Do you allow the volumes of daily noise to influence your investing?’
I learned long ago that having oodles of information at your fingertips are simply not required. One basic principle of successful investing is to ignore the daily avalanche of short term events. Investment experience will improve by paying more attention to your guiding principles.
Handling information excess
All investors display some level of confirmation bias. All of us believe we are open minded. However, the facts show that bias shapes the opinions we value. Yet, knowing about it and accepting that it does exist, helps make attempts to recognize it. That usually assists in seeing things from another perspective.
I suggest that adopting this approach is helpful:
- Remind yourself that markets are logical, while investors are emotional. Distractions of the day will tempt you to take your eyes off the ball. Hence, try not to get sidetracked.
- Keep your focus on your long-term goals and objectives. That is your top priority. After all, managing your money is a long journey, not a short sprint.
- Get ahead of the curve. Learn to be more proactive and less reactive. Develop your personal game plan that stewards your wealth. Then proceed to make it happen over time.
Think of it this way. If you start the investing process at age 30, it takes roughly 30 years to accumulate your nest egg. That leaves the following 30 years to enjoy spending some or all of it. Perhaps, also pass some onto your loved ones.
These 30-year ballparks are far too long for you to be preoccupied with chasing bias that does not work. You need to recognize that having information at your beck and call contributes little to you becoming a better investor
I recommend that your main task is to start turning off the sources of daily noise as soon as you can. Once this is accomplished, that feeling of liberation settles in over the nest egg.
I’m keenly interested in how you turned off the taps. A note is appreciated. Thank you.