Rules of the Game: Being Boring

 | Mar 25, 2014 | 12:30 PM EDT  | Comments
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I have never, ever understood this desire to be like Jesse Livermore, a guy who killed himself after repeatedly losing fortunes and messing up personal relationships. It's actually a very sad story, one that the stock-trading acolytes overlook as they try to discern wisdom in quotes like, "Money is made by sitting, not trading." That came from a guy who made speculating his lifelong occupation

It's interesting, isn't it, who attains hero status, and who is held up as the "most brilliant of all time"? But what good does it do? On the opposite end of the spectrum, people also try to invest like Warren Buffett. That gets people into a different kind of trouble than trying to trade like Livermore. They start saying things like, "I don't like bonds," and trying to value single large-cap U.S. stocks. In other words, putting no strategy into their investment selection.

So, when it comes to wealth building, what is important? If you've read my previous columns, you probably realize that I've renounced my stock-trading ways, and now favor a balanced approach to investing. Focusing on single stocks is gambling, and it ultimately reduces your return.

But wait, there's more!

I'm actually becoming more and more convinced that nobody really wants to be a financial expert. People just want to get their own financial situation organized. Sadly, we're being increasingly led to believe that organization requires following analysts' opinions about Facebook (FB) or Apple (AAPL), knowing what Barron's says about China this week, or what Fed Chief Janet Yellen said yesterday.

I used to listen to NPR's "Marketplace." Not so much anymore, just because I've cut way back on my financial media consumption. But it was a pretty big story when host Tess Vigeland quit the show in 2012, with no other job in sight. She's written about it extensively on her blog.

But I found an even more interesting quote from her on another blog. She mentioned that there were only six basic tenets of personal finance, but our society wants to make things more complicated. You can read her quote here

See? It's simple! Vigeland's rules focus on the common sense. I didn't see anything there about Bollinger Bands or prognostications for the euro. You know why? Because they don't matter to your financial future -- they really don't.

But it's boring.

I work with Lee Munson at Portfolio in Albuquerque. We share an office, so we spend a lot of time together. Those of you who are CNBC watchers may know who he is, as he is on pretty often. In the office, we shake our heads all the time about the "boring" factor of what we do. We use low-cost, highly efficient Dimensional Funds to keep people diversified in equities and fixed income. No single stocks or bonds. As fiduciaries, we also have insurance products available as tools, when needed. There's never, ever any conversation about what stock is hot now. It doesn't matter.

Of course, when Lee goes on TV, nobody wants to hear that. They always want a forecast for Facebook or Chevron (CVX) or a quote about whatever tech stock is hot at the moment. That's entertainment. It's not personal finance.

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