Calorie Counting for Stock Investors

Beyond Buy-and-Hold #13

By Rob Bennett

Everyone else has gone into the living room to watch television. You?re looking over at the cheesecake. One more slice? No! It would be wrong!

How about a teeny, tiny slice? A slice that small couldn?t hurt anything. I?m talking about a piece so small you can barely see it. I mean, come on.

Sound at all familiar?

We humans are self-deceivers. We?re hard working. We?re creative. We?re loving. Still, deep down inside there?s something weak and bad in us. We cheat. That?s the thing. It?s not only others that we cheat. We cheat ourselves. We do it all the time.

We say we?re going to get regular exercise and it doesn?t happen. Who loses out? We say we?re going to not put off doing the taxes this year and the vow turns out to be a lie. Who suffers the anxiety that comes with getting all those records together at the last minute? We promise we will never again say an unkind word to our loved ones. Yet the next time one says or does something that hits one of our emotional hot buttons, we mess up yet again.

Investing! This is a column about investing, Rob. Please!

I know it?s a column about investing. It?s the things that affect investing that most of us don?t acknowledge have much to do with investing that are killing investors today. We need to begin talking about this human stuff. All investors are humans. So it applies.

Humans are cheaters, mess-ups, self-deceivers. Investors are humans, so investors are all those things too. That?s why the last decade turned out to be The Lost Decade. Another way of saying it is that the 1990s were The Cheesecake Decade and we had to endure the rigors of a Lost Decade to get even somewhat back in shape.

Self-deception never helps. It really would be a plus to get the taxes done on time and to stay in shape and not to yell at the kids. But we all have this Great Rationalizer Chip implanted in our brain machinery that forgets all that each time an opportunity to mess up again presents itself.

The best we can do is to put up a struggle. We do try to hold our tempers and to avoid procrastination and to put a limit on the calorie consumption. We tell stories about this sort of thing all the time. Our friends offer reassurance and tips won from their own hard battles fought against The Great Deceiver Within. We try not to let the Mess-Up/Reform/Mess-Up Again cycle get to us too much. We tell jokes about it. That makes it a bit easier to endure.

We need to begin following these same sorts of practices in the investing realm.

The big mess-up in investing is overvaluation

So long as stocks are priced reasonably, the long-term return is 6.5 real. Most of us don?t need to do any better than that. We would all be living in investor?s paradise if only we could do something about The Overvaluation Monster.

But what can be done? Stocks have always gone through these insane pricing cycles. The crazy bull/bear cycle is a reality we need to accept, like gravity and rainy Saturdays and stinkbugs.


We can beat this thing.

We possess coping mechanisms that we employ in every area of life endeavor other than stock investing to rein in our self-destructive impulses. Doctors and nutritionists do not just tell us what we want to hear when we turn up for an office visit 50 pounds overweight. They are kind in the way they say things. But they are professionals and they know that too many slices of cheesecake can bring us to an early death. So they tell us what we need to hear, not what we want to hear.

Our friends do the same. They soften the message with a joke. But they help us by shooting straight with us because they know they must –love compels them to do the hard thing.

What InvestoWorld needs now is love, sweet love, that?s the only thing that there?s just too little of. I?m not kidding. We have charts and tables and calculators and studies coming out of our ears. They are not helping. Perhaps you?ve noticed. We need to start doing something about our gluttonous and irresponsible and shameful and sad overconsumption of Get Rich Quick.

It’s time to get in shape–financial shape!

You?ve let yourself go, dear fellow investor. That?s the message I am trying to get across here. You?re fat. You?ve got a big butt. You are going to need to take some serious steps. Not next year. Not next month. Not next week. That jelly donut you?re holding? Put it down! Now!

I?m fat too. All of us are. As a society of investors, we are today the most out-of-shape, could-not-run-a -mile-if-our-lives-depended-on-it fatsos ever seen. We will be going down in the record books for that feast we enjoyed in the late 1990s and that?s not a good thing. Summer will be coming before you know it and there?s too much gut to suck in for a bit of gut-sucking to make it okay this time. Even our fat jeans are getting tight!

I?ll tell you what. I?m willing to start getting up a half-hour early each morning if you?re willing to do the same and use the time to go for a morning walk each day with me. I hate the thought of getting on the scale as much as you do. But I have a suspicion that working up the courage to step on the scale will improve our outlooks. For the first time in a long time we will be doing something about this economic crisis instead of just pointing the finger of blame.

I know this much for sure. On the next trip to the stock investing store, I?m not even going to slow down when passing through the cheesecake aisle. I?ve had it with this self-deception business. I?m making a change!

How much do you think self-deception, self-hypnosis–and other delusions–affect our approach to investing in the stock market and elsewhere?

Rob Bennett writes about the Eight Paths to Financial Independence. His bio is here.

( Photo by alancleaver_2000 )

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