What are you trying to accomplish as an investor, really? It could be the most important question you will ever ask yourself, at least it terms of your money.
The answer can vary broadly. Some people invest simply to “make money.” Others work at it because they want the security of long-term retirement savings growth.
For others it’s a pastime, a way to occupy their mind and feel engaged in a particularly complex puzzle. Still others don’t want to think about it at all but feel forced into it by their own fear of losing out.
Where do you fall on this scale? If your natural inclination is to say that you invest to grow your savings, then it’s really important to mentally separate yourself from the rest of investors.
Why? Because while the point of investing is to “make money,” it’s far too easy to confuse attempting to make money in the short term, which is trading, with making money in the long-term, which is true investing.
It’s an important distinction because trying to trade your way to riches is a real calling. If that is truly your intent, or if you are an investor who simply enjoys the rough-and-tumble of the markets, then own that. And be ready to own the outcomes, either way.
But don’t confuse it with investing. Trading is the full-time occupation of trying to out-think and outmaneuver millions of total strangers. It’s multidimensional chess played with real money, and when you lose, you really lose.
The stock and bond markets are crammed with the “career tombstones” of thousands of traders and money managers who thought they could out-think everyone else. Some flame out fast. Others hang on for months or years, then wipe out so spectacularly that their names are remembered for decades — for all the wrong reasons.
Great investors, however, can be nearly invisible. They don’t have any need or desire to crow about their track records on cable TV. After all, most are not in the business of vacuuming up money from investors for the attached fees.
No, the great investors often are quiet, behind-the-scenes types at major pension funds, insurance companies and university endowments. They are humble to a fault, even secretive.
They rarely talk about their strategies or ideas on TV, nor would you if your job was to safeguard the retirements of millions of residents in your home state.
Likely, you are restricted from doing so by regulators, but you also have no motivation to talk much. You handle so much money that telegraphing your moves can cause markets to shift before you even get to act.
A real retirement investor doesn’t trade unnecessarily. Rather, it’s about owning asset classes and allowing the markets to work for you.
A properly designed portfolio that is rebalanced judiciously does not require a tremendous amount of day-to-day attention, nor does it cry out for a bespoke investing “style” that attempts to outdo all comers.
Rather than trading, it is investing, simply owning whole markets and realizing market gains by keeping a portfolio in balance over the long term. You won’t have much to brag about — until the end, of course, when your portfolio has quietly trounced the short-term risk-takers.