When people learn that I work in and write about personal finance, often their first questions are about the stock market.
What did the market do today? Where do you think the market is going?
They are often surprised and even a bit frustrated when I reply that I don't know what the market did on a particular day. I also have no idea where the market is going.
I remember a conversation with a family member where he replied to these statements like so: "What do you do? Isn't it part of your job to know where the market went today?"
These questions led to a discussion about my job and the reality that it's about helping people make smart decisions about money that build and protect their wealth over time. In fact, knowing what the market did today, or spending a bunch of time thinking about where the market will be in the future, is actually the opposite of what I want people to focus on.
Watching every market move, listening to CNBC in the background or spending a bunch of time researching gurus' forecasts takes a lot of time and generates a lot of anxiety. And it almost always leads to behavior that results in big mistakes that cost us (not make us) money.
Like what, you might ask? Well, these for starters:
- Buying high, selling low.
- Confusing investing with entertainment.
- Relying on the greater fool theory.
- Investing based solely on familiarity.
- Anchoring money decisions based on the past.
There's been a lot of chatter recently about the impact of being constantly connected in our lives. More often we're seeing suggestions that we need to take time to unplug. The idea is that when we unplug and take the time to connect with family, we're more likely to feel a greater sense of community and happiness. Indeed, one of my ongoing goals is to spend less time watching, worrying, and thinking about what the market is doing in the short term.
A couple of years ago, a Wall Street Journal article talked about the impact of technology on our family relationships, and one quote jumped out at me: "Technology should be on the list of the top reasons why people divorce, along with money, sex and parenting." When it comes to relationships, I thought the only thing I had to worry about was money, but it appears technology could be an issue, too. So what happens when you combine technology and money?
To help counter the noise and the conflicting signs, I suggest that you take a media fast. For example, when the Dow recently hit 15,000 there were headlines and discussions about what this benchmark meant for investors. However, from my experience, making money decisions based solely on external factors, like the value of the Dow or an individual stock, isn't the wisest way to plan for your financial future.
So if investment success is truly about behaving correctly over the long term and choosing investments within the context of your plan, what happens in the market, day to day, should have no impact on your decision-making.
Try the fast. See what happens when you turn off the noise and pay more attention to what's happening right in front of you.
A version of this post appeared previously at The New York Times.
Carl Richards is a financial planner and the director of investor education for the BAM ALLIANCE, a community of more than 130 independent wealth management firms throughout the United States. Visit Behavior Gap for more of Carl's sketches and writings.
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