One of the most predictable trends in life is how we tend to be less interested in new things as we age.
Music is fascinating to the young, while older fans dwell on the hits they once knew. Adventurous eaters eventually fall into a rut of five or eight favorite recipes. We begin to revisit resorts we know well over new places and new faces.
Staying out of that rut can be a restorative tonic in one’s later years. Reading new authors, eating exotic foods and visiting new lands is a good way to stay young.
Yet the very fact that we view change as a way “stay young” proves the point. We associate learning with youth and, illogically, age with knowledge, as if there’s nothing new to learn after 40 or 50 years on this Earth.
There is one very clear counter-trend. It usually isn’t until early middle age that people start to wake up and pay attention to their finances. Looking down the road 20 years to a retirement party is a motivator, of course.
But many middle-aged savers come into learning about money as a secondary effect of following the news. We feel invested in the political and social arguments of our time, and money is bound up in all of these questions at some level.
Pretty soon, we look inward and begin to ask: Am I doing this right? Am I on track to a retirement of safety and comfort? Or one marked by risk and want?
Often, investors engage this question the way they do any “hard” problem in life. They study the topic on the fly, trying to learn who’s who and how their ideals fit into the mold being offered to them.
Am I a conservative investor? A trader? Something in-between? The first logical step seems to be to find a role model, someone to follow. We feel comfortable with mentors, so we seek them out in real life or, more often, through the media.
Where retirement investors get into trouble is right at the beginning of the process. They want badly to learn, to engage and to conquer what can be a complex topic.
Never mind that legions of people on Wall Street spent years earning licenses and passing exams to do the same thing. We amateurs want the quick version, over and done in a weekend. Then we want to log on to our chosen brokerage account and start trading!
Wall Street loves people like us. Trading drives commissions, which in turn drives bonuses for brokers. It also provides plenty of “dumb money” around which far more experienced investors are happy to trade.
As Warren Buffett once noted about card games, if you look around the room and can’t spot the patsy, that’s because it’s you. You’re the mark, the “dumb money.”
It’s great to put your mind to work on a new, complex task or subject. People should tackle a foreign language, learn an instrument or take up painting later in life. It’s mentally invigorating.
And some people can and should be deeply involved in their investments. If you have a knack for numbers — say you ran your own business for decades or just like studying the markets — well, you probably will do just fine, with some fundamental preparation.
But, fair warning: The market beats up experienced and savvy traders every day, some so badly that they limp out of the ring for good. It’s no place for beginners.
Nor should you feel obliged to find investing strategy interesting. Not everyone does. By far, the most effective long-term investments are the most boring — low-volatility stocks and indexes, sleepy collections of bonds and portfolios that don’t change for months.
The less you do in this business the better, for the most part. That’s why retirement investors should seriously consider “set it and forget it” passive indexing.
Break out some play money in a small account if you feel the need to get your blood pressure up. Or put your brain to better use by taking up a new sport or pastime instead.