Retirement and Financial Independence

The Most Productive Thing You Can Do is Ignore The Numbers

I woke up this morning with the sun beating on my face from the tiny window above my bed. It’s sunny out, the sky is blue, the pillow is warm, and I’m starting to sweat. Fine, sun! Time to get up, I get it!

The very first thing I do is rollover and check the time on my iPhone which is charging on my nightstand. Fuck, it’s only 7am. I could sleep some more, but I’m awake now. Let’s see what Twitter has going on. Let’s see what Facebook’s up to. Let’s check Mint. Now, Betterment.

Here’s what I see:

God damn it! Why am I losing money?

Now it’s time to react. It’s time to freakout! That’s my cue to fire up Headspace and take a chill pill. After 20 minutes of meditation, I don’t react. I sit still and think about how awesome breakfast is going to be instead.

This may not sound like your typical morning, but it is for me. I have a bad habit of gluing my eyeballs to a glowing screen every morning, when instead, I should ignore my phone. I should embrace the warm glow of the sun instead and think about how awesome breakfast is going to be.

Perhaps, though, this DOES sound like you. Are you the kind of person who freaks out when you check your investments?

This is pretty normal, but I’ve learned — and am still learning — that this is a bad habit. Looking at the data is unproductive.

When I make breakfast (which I’ve already mentioned now 3 times because it’s the fucking best), I listen to podcast. I stick my iPhone in a glass bowl to amplify the sound — yes, it works! I was listening to the Tim Ferriss show where he interviewed the man who changed my personal finance life, Ramit Sethi (pronounced Rameeth Set-Tea).

He said…

One of the most unproductive things you can do is look at the data.

In context, he was talking about email statistics, but he also mentioned checking his investment accounts. He admitted to checking his investments every 6 or 12 months.

This really struck a chord with me because I’ve fallen into this trap myself.

Which is really funny and ironic because I often yell at Andrew for checking the stats on our website and podcast so much, and yet, here I am checking my personal finance data everyday.

The problem with checking this shit everyday is it can cause you to make rash and quick decisions that you wouldn’t make if you didn’t know. It’s better that your investments be out of sight, out of mind, for your own safety and wealth.

My brother recently freaked out when he saw his Betterment account take a sudden drop. He texted me in a panic. I had to reassure him of a couple of things I know to be true:

  1. The stock market goes up and down. It has since the beginning. However, overall the stock market goes up. Slow and steady wins the race when it comes to investing.
  2. If you’re worried about the stock market dipping a little, then you really don’t know how long-term investing works. If you listen to our show or read this blog, then you will have a better understanding and a more zen-like approach to building wealth.
  3. Frequent trading and moving your money around out of fear will statistically cause you to gain lower returns than someone who just buys and holds for a very long time.
  4. Sometimes the world gets shitty. People find out that the world is shitty through the 24-hour news cycle. Those people are idiots, especially when they freak out and move their money because of Ebola or ISIS or whatever is happening on CNN that day. (oh, and fuck you, Jim Cramer!)

Too much data and information is a bad thing when it comes to investing. Case in point, according to research from two finance professors from U.C. Davis and U.C. Berkely, found that the more carefully you watch the market, the more likely you are to believe that you have a good handle on things (and thus trade more often). The problem is, you don’t:

Studies show that, as people acquire more information, their confidence in their ability to predict outcomes rises far faster than the accuracy of their predictions.

Online investors have access to vast quantities of data. This data may give them a false confidence that they can pick stocks.

Billions of bytes of market data give most investors no more ability to pick individual stocks than to pick numbers on a roulette wheel. Of course some investors will succeed anyway, and they will be certain that they knew all along which stocks would be winners. And those who fail will be certain that they too were right, but unlucky—this time.

Thanks for that info and quote, LifeHacker!

So let’s end it with this lesson…

The more you check your data (the numbers, your investments, etc.) the less time you will have to do the most important thing: make more money to invest!

Stop stressing and start investing!

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