Updated: May 10
Investing to achieve important personal financial goals (retirement, a new house, a child’s college education, etc.) is not a game. It’s not ‘gambling’ (nor is it speculation-at least it shouldn’t be). It’s also not a competition with others. Investing is the allocation of capital (money) today with the reasonable expectation of achieving a profit (between dividends and price appreciation) over time. Nowhere in that definition does it refer to ‘beating’ an index, or your neighbor, or some Wall Street hedge fund guru who is the target of angry message board day traders.
When it comes to investing, the only person you should be thinking about is you – or more specifically, the future you. Every person who puts money into GME or JNJ or TSLA or PG or any other security is doing so for his or her own reasons (whether good, bad, or non-existent). Likewise, everyone who sells shares of a given company has his own rationale for doing so which has precisely zero to do with your situation (in many cases, little to do with the long-term fundamentals of the business just sold). People buy and sell stocks for all sorts of reasons: because they heard about it on a TV program and want to get in on the action, or in the case of selling, because they lost their job and their mortgage is due. You are not in competition with these people. Their goals and circumstances have nothing to do with yours. Therefore, consider spending far less time reading about what others are doing with their money and instead stay laser focused on what you are doing with yours.
Similarly, many investors feel the need to ‘beat’ something (an index, another person they know, a big wig investor, etc.) when it comes to performance. If, over a given period, their portfolio is ‘behind’ the S&P 500 for example, they feel as though they have lost even if they have made great strides towards their financial goals. Is it really a failure if your portfolio is up 8% in a year when the SPY is up 11% especially if your portfolio was far more diversified, took on less risk, and most importantly brought you closer to your financial goals (in a way that allowed you to sleep well at night)?
Slow and steady progress does not make headlines. Big sudden moves, like that of Game Stop which went from around $12 to an intra-day high of over $480 then back to under $50 in a matter of weeks, make headlines. Those kinds of massive gyrations are eye catching (eye popping?) and at best entertainment to you. By focusing your attention on your financial goals (near and long term) and defining these clearly with a disciplined, rational Financial Advisor who helps you construct a plan to achieve said goals – then the rest of the near-term noise that is daily market headlines can just fall by the wayside. Aren’t you better served spending that time volunteering, working out, communicating with loved ones rather than reading about the latest trading gains of ‘Angel Kitty Crypto Trader 22’ who just made 850% on GME calls (only to lose it all back a few weeks later when the stock collapsed)?
In many aspects of life, we feel the need to compare ourselves to others. How do our looks, our cars, our wallets, our kids, etc. fare versus those around us? And when someone famous suffers a downfall, it makes us feel better since our relative position has heightened. This is truly a sad commentary on humanity when there is so much to be thankful for without having to take joy in the downfall of others.
When it comes to your money, ignore what others are doing and how well (or not) they are doing it. There is simply no relevance to your own financial circumstances and the things you can control (how much you save, how much you spend, how disciplined you are in your investing, etc.). Your choices will lead to your outcome and that is what you will need to live with. Investing isn’t a zero-sum competition like a sporting event where there is a winner and a loser. You don’t need to ‘beat’ anyone to lead an amazing, rich (in all senses of the word) life. You just need to avoid big mistakes. This is where a great Financial Advisor can add tremendous value by helping you manage destructive natural behaviors with patience and discipline while riding the beautiful wave that is the equity market for years to come.
Your future self – the one you are saving and investing for will thank you for it.