The American philosopher and writer Henry David Thoreau wrote, “It is not enough to be busy; so are the ants. The question is: What are we busy about?”
Most people, unfortunately, ignore Thoreau’s timeless advice. Instead, we scurry about an hour after hour, day and after day but mostly without insightful thought. Especially with our investments, we check our portfolios and share prices of stocks much too often. We then buy and sell too frequently. This “do something” activity is one of the significant reasons for underperformance in investing.
Four main reasons why we succumb to this mistake of overactivity are:
- We tend to compare our portfolios with others. Instead of focussing on a healthy absolute return, we frequently compare ourselves with others. There will always be someone who is doing better. Our tendency then is to take immediate action to try and catch up with this other person’s position.
- It is much easier to be in motion than to stop and think. As humans, we always try and take the easy way out. It takes great effort to pause and analyze the situation deeply. This analysis can take a long time to complete. Instead, just doing something – almost anything – gives us the false feeling of being valuable and successful.
- Over-complicating issues is a third reason for taking un-needed action. With the thousands of emails and social media posts that bombard us each day plus the 24-hour news cycle – we are made to believe that a million important things are happening around us. If we simplify and try and understand the few critical aspects in any endeavor, we would need to take action only once in a while. Simplifying our lives as much as our investments may result in big pay-offs.
- We are impatient for results. We want to lose weight today. We want to get fit overnight! But, all important results take time to achieve. Warren Buffet wrote, “The stock market is a device to transfer money from the impatient to the patient.”
Two helpful activities that can help us combat the “do something” disease are:
- Read more and read widely. Ask yourself how many books you have read this year and what variety of subjects you have explored? Like a wide-angle lens in photography – reading gives you a better perspective and is immensely enjoyable.
- Meditation. Our Indian heritage has given us vipassana meditation. It can result in calmness and an ability to face the world with a clear mind.
Charles Munger commenting on Warren Buffett and his investment success, said, “We’ve got great flexibility and a certain discipline in terms of not doing some foolish thing just to be active – discipline in avoiding just doing any damn thing just because you can’t stand inactivity.” If we follow just a part of Munger and Buffet’s advice, we will be both richer and happier than we presently are!
© Kaikhushru Taraporevala