The Diverse Rewards of Being an Oblivious Investor

Imagine you set up an automated Twitter account called something like “Inside Investment Advice” and made it alternate every 24 hours between two tweets:

Oh God! Sell! Sell! Sell! Sell!

AND

Oh God! Buy! Buy! Buy! Buy!

You would probably accrue far more followers than you deserve. There seems to be endless demand for panicky, hyped-up advice to TAKE ADVANTAGE OF THIS STOCK TIP NOW OR ELSE YOU WILL BE SORRY!

That’s a reason I love websites like The Oblivious Investor, which recently featured this exchange between a reader and the website creator, Mike Piper.

Q: How often do you calculate your portfolio’s rate of return?

A: Never.

It’s also why I am grateful to Mitch Tuchman (see his investment advice here) who convinced me in the course of one conversation that the people who benefit the most from fund managers who emit a steady stream of advice to sell and buy are fund managers who emit a steady stream of advice to sell and buy.

I am not a financial guru by any stretch, but I am someone whose profession has learned a good deal about how human beings make decisions in the face of complex information under conditions of high emotion. To summarize a complex scientific literature simply: We stink.

That’s a key reason why investment experts like Mike and Mitch preach that you will almost always lose money over time if you jostle your investment portfolio every 20 minutes based on the latest tip, trend or tweet. As a psychologist, I can also assure you that in addition to losing you money, it’s a surefire way to make yourself a lot less happy.

[Cross-posted at The Reality-Based Community]

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Keith Humphreys

Keith Humphreys is a professor of psychiatry at Stanford University. He served as a senior policy advisor at the White House Office of National Drug Control Policy from 2009 to 2010.