My dear child:
Two professors once followed sixty-six thousand households for six years to see who actually made money in the stock market.
The answer embarrassed everyone. The people who traded the most earned about eleven percent a year. The market itself returned almost eighteen. They didn’t lose because they picked bad companies. They lost because they couldn’t sit still. Every trade felt like progress. But actually every trade was a small leak. Six years of leaks drained nearly half their gains.
Warren Buffett built his fortune doing the opposite. He found a few good things, then practiced what he called lethargy bordering on sloth. He let the years do the work the clever men kept interrupting.
This is the part that offends people. Moving stocks around feels like control. In investing it’s usually the cost. The market is a machine for moving money from the impatient to the patient, and the impatient pay for the privilege of feeling like they’re doing something.
So before you check your account again this week, ask what you’re buying with that glance. Action, or wealth… You rarely get both.
The best thing a person can do with a good investment is forget they own it.
One thing I'd tell my younger self: Most times I "did something" with my money, I was paying a fee to feel in control.
From the bookshelf: "The Psychology of Money" by Morgan Housel. He shows that doing less is the hardest and highest-paid skill in investing.
A question to sit with: What would your portfolio look like in twenty years if you simply stopped touching it? P.S. I have a free tool that helps you figure this out.
Yours sincerely,
