How investors can learn from the five regrets of the dying

Given that the market is so aimless right now, but everyone seems so busy, I’ve grown reflective of the some of the things that are important in life and why it is that we avoid them. So much of life is, as Warren Buffett often describes investing, ‘simple but not easy’ and the odd character of the five regrets is that they are so obvious, yet so commonly ignored.

1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.
2. I wish I hadn’t worked so hard.
3. I wish I’d had the courage to express my feelings.
4. I wish I’d stayed in touch with my friends.
5. I wish I had let myself be happier.

Take that fishing trip?

It might seem strange coming from the founder of an investment website to say this, but the truth is that investing just isn’t that important - certainly not to make those sacrifices. Jesse Livermore once said ‘There is a time to buy, a time to sell, and a time to go fishing’ but it seems so few of us ever take the fishing trip. If only we were able to step back from our daily obsessions maybe we wouldn’t suffer the same fate as those souls now departed. There’s a cost to everything, and the cost of working so hard can be lost friendships, stress and missing out on doing the things you really love to do. The grail we should all be after is to find ways to simplify our work and investing processes to reach a point of maximum effectiveness for the time spent, not over-reaching for the extra yards which eventually show their cost in other parts of our lives.

James Montier is one of my favourite investment writers who has waxed so eloquently about the travails and delusions of investors. He has shown time and again that most of the work that we do is done just to keep ourselves busy. “The whole investment industry is obsessed with learning more and more about less and less until we know absolutely everything about nothing. Rarely if ever do we stop to consider how much information we actually need to know in order to make a decision”. And the research shows that we just don’t need that much information to make good decisions.

The dangers of too much information

Montier once described a test where a few groups of bookmakers were given different amounts of information. The first group were given five pieces of information about a horse, and the others were given further increments of five up to a maximum of forty. “Sadly as more and more information was made available two things happened…. accuracy flatlined [but] the degree of confidence increased massively”. Information overload is a trap. As investors it makes us more likely to over-trade, or to grow too attached to our stocks. We should be minimising the amount of information we use in our decisions in order to maximise their accuracy not our confidence in them.

This is what the great investors are so good at. There’s a decisiveness that comes with simplicity. Jim Slater, one of the most decisive men I’ve met, once said to me in person “it’s all about the criteria” and they are words I never forgot. Increasingly in my reading I’ve found that the best investors use simple checklist based approaches to ensure stocks fit their style, and use just enough diversification to ensure they keep an emotional distance from their investments. But, beyond that there’s a growing body of evidence that shows that using simple quantitative approaches that replicate common sense investment strategies can beat the majority of market participants. I’m certainly not the wisest investor out there but I have learnt one or two tricks and the best tricks of all are those that save you time for the more important things in life.

I like to think that the tools we’ve built here can help our subscribers to find the middle path, to allow them to have confidence in their process and decision making without getting too close to individual stocks and without wasting their lives worrying about trivia. I was going to finish this letter with a rundown of all the ways the site can help investors do this, but I’ve probably done that enough before and I’m sure will do that enough again. I think its best to leave this reflective Friday musing with the thought that investing doesn’t need to be an obsession, that there are more important things in life, and shouldn’t we be looking for ways to make it easier?