Change. We spend much of our time thinking about, predicting and anticipating it.
Several years ago, the founder and CEO of Amazon, Jeff Bezos, turned the question of change on its head. He said it is more important to consider what will not change. In other words, what are some fundamental truths we can rely upon?
What Won’t Change
Human nature. Sure, the players and environment may change, but how we behave as a group seldom changes. Our preferences as humans tend to be static. Our physiology (hardwiring) hasn’t changed much over the centuries.
We Are Hardwired to be Bad Investors
That is a fundamental truth. Think about it. As humans we are emotional, we tend to respond hastily when threatened, we often overreact, we prefer shiny or sexy things to the mundane, we are distracted easily and we hate uncertainty. We face this on a daily basis in the markets.
Long-term investing is meant to be boring, but our brain desires the exciting. The majority of news is nothing more than noise to the long-term investor. It’s sexy and alluring, yet a costly distraction for most investors.
We can learn from Mr. Bezos again. He said, “When you have something you know is true, even over the long term, you can afford to put a lot of energy into it.”
Using Your Energy Wisely
Most investors use their time and energy speculating on market outcomes and public policy. In other words, we spend our time and energy on things that are unpredictable and always changing.
We should spend our time and energy on things that don’t change – like human nature. We need to focus on what we can do today to respond better to whatever occurs tomorrow.
For that reason, I am focusing on how to help all my clients ignore the noise, maintain the proper perspective and improve their financial decisions – despite our natural inclination to allow today’s news and yesterday’s market moves to influence us.
