3 Tips to Get You to the “Good Place”

My wife and I are rewatching the TV show The Good Place. If you’ve never seen it, I highly recommend it. It’s a comedy about the afterlife. It’s very funny, well acted, and brilliantly written.

One of the characters, Chidi, is incapable of making decisions. He’ll torture himself for hours over the minutiae of life, such as choosing between a blueberry or banana nut muffin. More important decisions take even longer.

Though it’s not named in the show, this type of indecision can be called “analysis paralysis.” It’s when you spend too much time going over the data and you end up frozen, fearing the consequences of making the wrong decision.

This happens to investors all the time.

Even trying to decide between a few mutual funds or ETFs can cause emotional agony for an investor.

Here are a few tips to help you get unparalyzed when it comes to making investment decisions.

1. Remember That You Won’t Be Right All the Time

You’re going to make a lot of investment choices in your lifetime. They won’t all be right.

I always tell my Oxford Income Letter subscribers that in any stock portfolio, most stocks will perform roughly in line with the market (give or take a few percentage points), a small number will be dogs, and a small number will be home runs.

You don’t have to be right all the time. And you won’t be. No one is. The key here is money management. If you keep a lid on the losses of the dogs and let the big winners run, your portfolio will be just fine. In fact, it will be better than fine.

Many people find reasons not to invest. In a bull market, it’s “the market is too expensive.” In a bear market, it’s “I’ll wait until the bottom.”

No one is capable of consistently calling market tops or bottoms. A few people have made amazing market calls, where they did in fact warn investors about impending bear markets or tell folks to load up because the bear market was over. But no one has done so twice.

So don’t try.

Bull markets often go up for much longer than you expect, and bear markets – while they can be nauseating – tend to be much shorter than you think they will be.

The average bear market lasts less than a year, and it takes an average of 2 1/2 years for the market to get back to its peak.

If your time horizon is only three years, you shouldn’t be in the stock market anyway.

If it’s longer than three years, then don’t worry about bear markets.

Invest at regular intervals – whether it’s monthly, quarterly, on your family members’ birthdays, etc. – set reminders on your calendar, and stick to your plan no matter what. I don’t care if the market is up or down 1,000 points that day. Don’t try to time the market.

The factor that has the greatest effect on investing success is time – not stock picking and certainly not market timing. It’s the amount of time you stay invested. Do everything necessary to keep your money invested for as long as possible, and ignore all of the outside influences that could scare you out of doing so.

3. Make It Fun

Investing should be taken seriously. Your money and financial future are at stake.

That said, you’ll be a better investor if you’re enjoying it.

Keep a small amount of money on the side to speculate and invest in things you’re interested in. It really can be a tiny amount. Since there are little to no fees these days, you can literally buy one share if you choose.

My stock market journey started when I bought $600 worth of stock many years ago. Today, you can buy much less and still have exposure to the market.

Whether it’s a sector like technology, an individual stock, or an asset class like crypto, if you’re enthusiastic about it and have some money at risk (even a tiny amount), you’re going to start learning more about investing and trading and get better at it.

One of the worst things someone can do when it comes to investing is to do nothing at all. Instead, do whatever it takes to make the decision to invest (and keep investing) easier.

Chidi struggled all of his life to make decisions and paid dearly for it. Action is better than inaction. Take the necessary steps to get your portfolio to “a good place.”

Good investing,

Marc

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