Feeling Lazy? Here's Why That Could Make You a Better Investor

I'm sure this isn't overly shocking to some, but many investors don't care too much about investing. They invest because they know they should and like watching their money grow, but they don't necessarily care for a lot of the aspects surrounding investing -- and that's perfectly fine.

In fact, that could actually make some people better investors. By incorporating a hands-off, or "lazy," investing style, investors can often achieve comparable or better results than active investors, with much less headache.

Don't get distracted and lose sight of the goal

One of the worst rabbit holes you can go down as an investor is frequently trading and thinking you can consistently time the stock market. You may be right every now and then, but history shows that the vast -- and I do mean vast -- majority of people can't do it consistently over time.

That's why you shouldn't go chasing trends. Investing should be for the long term; the goal is to use the stock market to build wealth, not treat it like gambling. You risk missing out on some of its best days by attempting to time the market.

Below is how returns differ based on how many of the S&P 500's best days (defined by largest same-day movements) an investor missed from January 2002 to January 2022.

Data source: J.P. Morgan.

By being "lazy" and letting your money sit in investments for the long haul, you lower the chances of making badly timed trades that hurt your overall returns. And for perspective on how easy it is to miss the stock market's good days, seven of the 10 best days above happened within 15 days of the 10 worst days.

It's bigger than just the returns

An underrated part of being a hands-off, "lazy" investor is the stress you can possibly save yourself. Money is already an emotional topic for most people. Paying too much attention to the short-term noise in the stock market (like daily price movements) could make you stressed and anxious about things out of your control.

The only certainty in the stock market is volatility; it's always been that way and always will be. Being hands-off and focusing on the long term allows you to ignore much of this volatility, because it doesn't matter in the grand scheme.

Take The Trade Desk (TTD 3.35%), for example. From September 2018 to December 2018, the stock price dropped close to 30%; from February 2020 to April 2020, it dropped over 46%; from December 2020 to May 2021, it dropped over 43%; and from November 2021 to July 2022, it dropped over 61%.

Which do you think investors care most about: the stock's volatility over the past five years, or the roughly 1,200% it's increased by over that span? My guess is the latter.

You also don't want to give yourself decision fatigue. When you actively trade, you're consistently thinking about what stocks to buy or sell (and when), which can be mentally draining. Making emotionally driven investing decisions is generally bad, but making them while mentally fatigued is worse.

Being "lazy" means not constantly thinking about which trades to make. You can set your investments, make them as scheduled, and go about your business.

Try putting yourself on a schedule

Regardless of how much conventional wisdom says trying to time the market is bad, investors of all levels still get the urge every now and then. I'm no exception. However, one way I try to personally stop myself from timing the market is by using dollar-cost averaging.

With dollar-cost averaging, you put yourself on a set investment schedule and commit to making your investments regardless of stock prices at the time. It could be every other Friday, every first Monday, the 15th and 30th, or whatever works for you. Your frequency doesn't matter nearly as much as just making sure you stick to your schedule.

Dollar-cost averaging is essentially how 401(k) plans operate. Every paycheck, your 401(k) contributions and investments are made, regardless of stock prices at the moment. Just as people trust that it'll work out in their favor over time, the same logic should be applied to non-retirement account investing.

Embrace "laziness" and trust the long-term process.