SCOTT REED: Long-term investing is boring but works

By Scott Reed

It is important to remember there are two distinct sides to investing money – the side that is a game of chance and the side that is serious about reaching goals and accumulating wealth.
The game-of-chance side can be very exciting. There is a lot of information floating in cyberspace that you can digest and will make you feel smarter about current hot topics in our world. Entire television channels dedicate themselves to making sure you have an opinion on almost anything you may be asked about at your next cocktail party. Every day, financial channels invite guests who have made a lot of money in a relatively short period of time by using that information to invest in stocks that are going through the roof.
So you take the plunge and begin to invest, then the next thing you know you are checking your smart phone every few minutes or seconds – depending on how hooked you are – to see how your stocks are doing. You can get completely engrossed in that world and spend an enormous amount of time working on your next brilliant move. You find friends to talk to who have been doing the same thing and all of you feel very smart, which is a fulfilling way of life.
I’m not claiming that knowledge is a bad thing, but the problem is in the implementation. I’ve just never known anyone who could continue to be right day in and day out. The problem with short-term investing in stocks is that it is highly volatile. And when things go against you it can get very ugly. You have to have the patience and the financial wherewithal to hang in there when it appears that all hope is lost. Most people don’t have both the human quality or the financial staying power, and you really have to have both.
Never Never Land
If you happen to be one of those folks who think you are the exception and that you can manage your way through your investment life without succumbing to the wrath of the bad streak, I have a nickname for you. I’ll call you Peter Pan because you are living in Never Never Land. It just doesn’t happen. Can you imagine anyone, other than yourself, of course, who could manage investments year in and year out for decades without having a major crisis? It just doesn’t happen, and most investors can’t handle it. They end up bailing out at the most inappropriate times because they just can’t take it anymore.
Wouldn’t it be nicer to simply invest your money for the long run at the start? Read investment strategy books instead of current events and don’t try to turn everything you hear into an investment opportunity. It’s much more boring and tedious work, but the investors I know who methodically go about the business of investing and who are consistent in their process are the ones who have had financial freedom when they need it most.
The added advantage to a long-term plan is all the time you save. By not having to keep up with every little thing that is going on, you will have more time to spend working at your real job and making money you can invest. The part you put in has always been the most important part of an investment program, and it is where you should spend most of your time.
Bore yourself to financial success. Added advantage: Valentine’s Day will be much better because you can actually concentrate on your sweetheart instead of the overseas openings. Happy Valentine’s Day.
Scott Reed is CEO of Hardy Reed in Tupelo. Contact him at (662) 823-4722 or sreed@hardyreed.com.