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It’s Because Investing Is So Important That We Get It So Wrong

Beyond Buy-and-Hold #82

My two boys received the card game Dominion for Christmas. The three of us play a game nearly every night after dinner. I wanted to learn some good strategies, so I put the phrase “Dominion strategy” into a Google search and turned up this — DominionStrategy.com.

It’s an awesome resource. It contains all the information you need to advance from novice to expert. In one place. For free.

Why can’t there be something like that for stock investing?

There isn’t. Enter a search on any basic investing question and you are going to turn up a lot of Buy-and-Hold stuff. As you know from earlier columns, Buy-and-Hold was discredited 30 years ago. If we can create super sites on how to play Dominion in three years, why can’t we create super sites on stock investing within 30 years of the time the insights we need are revealed to us through academic research?

Investing is too important.

As paradoxical as it sounds, that’s the reason.

Lots of people know how to invest effectively. Lots of people would like to learn what these people know. We have available to us a communications medium that makes it easy for the one group to share its knowledge with the other group. But it hasn’t happened. Investing is just too darn important.

Say that you and your spouse both believe in honesty. You work hard not to lie to each other. One day, you buy a candy bar in violation of your New Year’s Day resolution to cut back on sweets. Do you tell her? You probably do. It’s no big deal, right? She might be slightly disappointed in you. But any heat you will feel will be over within 20 seconds. You don’t violate your belief in honesty over something so silly.

Now say that you cheat on your spouse. Do you tell that one? Perhaps you do eventually. But that’s a hard one to tell. It’s a big deal. You are going to be feeling the effects of that one for years to come. You think it over and think it over and think it over before you tell. You rationalize like crazy. You send your excuse-making powers into overdrive to avoid having to tell the thing that really must be told more than anything else.

That’s where things stand with stock investing in the year 2012.

Getting stock investing right is too important to too many people to take lightly

Getting stock investing right is a whole big bunch more important than getting Dominion strategy right. As a result, it’s easy to find resources that tell the straight story on Dominion but darn hard to find resources that tell the straight story on stock investing.

No one knows everything there is to know about how to play Dominion the first time they play it. And no one knows everything there is to know about how to invest in stocks the first time they invest in stocks. We learn by doing. As the years go by, we gain experience and we know more and more and more.

Dominion players share their knowledge with each other. Stock investors do not. Why not? Because no one wants to mess up when it comes to stock investing. It’s not a game. How you invest determines whether you will be able to retire at a reasonable age or not. So, when we see our friends messing up their retirement plans, we keep it to ourselves. It would hurt their feelings if we were to tell them that they were doing it wrong.

I can’t tell you how many times I have had people direct this sort of message to me. They tell me “it’s not your message that people object to, Rob, it’s your style.” Or “You can say whatever you want, you just need to use a different tone.”

What people mean when they say that my style or tone is wrong is that I report numbers accurately. I don’t say “it is my opinion that stocks may not do well.” I say (when it is so) “there has never yet been a time in U.S.. history when stocks have provided good long-term returns starting from these valuation levels.”

We all could become far more effective investors than we have ever been in the past

The information we need has been available to us for 30 years. We don’t make use of that information because we are all afraid of hurting each other’s feelings and we know that it hurts people’s feelings to tell them that they have made investing mistakes.

We cannot add to our knowledge of how to invest our retirement money. It just hurts too darn much to accept that we didn’t always know it all. And so we made big mistakes. And those mistakes have delayed our retirements by many years. And brought on an economic crisis.

I don’t like hurting people’s feelings. But I don’t believe in pulling bandages off slowly. My take is that, when you have messed up, the best thing is to come clean as quickly as possible and thereby to get the painful stuff behind you and the good stuff in front of you. I don’t tell people stuff they don’t want to hear because I want to cause them pain. I tell people stuff they don’t want to hear to help them avoid feeling even greater pain.

Things have now reached a point where the millions of us who have been doing everything in our power to avoid learning how to invest effectively are feeling pain despite our efforts t avoid it. When that pain gets big enough, I think things will break. I won’t be saying “I told you so.” I’ll be saying “Now here’s how you do it, my good friend.”

Check out that Dominion site. People teach there. And people learn there. And they are all having fun. That’s how it should be at investing sites too. That’s my dream.

Rob Bennett has advice for those saddled with a bad boss. His bio is here .

 

Related Posts:

The Question That Should Terrify Investors
Your Favorite Investing Expert is NOT Your Friend
Am I Crazy For Being Out of the Stock Market for 14 Years?
Most Stock Investors Are Gambling With Their Retirement Money
Risk-Free Stock Investing?
Nothing Brings Down a Savings Rate as Much as a Bull Market

( Photo from Flickr by Helico )

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