Morgan Housel is a personal finance writer I admire a lot. I keep reading and re-reading his posts.
I’m sharing two points from the same.
“Most investing mistakes and frustrations come from trying to run a marathon in an hour“. Diversified investing is so simple. Companies earn profits, and over a long period of time those profits accrue to shareholders. If you leave it at that – and you should – investing is such a basic game that doesn’t require much action. But instead of letting profits accrue over time, a lot of the investment industry attempts to speed up the process by front-loading gains into shorter periods. This is done by guessing what other investors will do next and trying to get ahead of them. It’s a billion times harder than true investing, and it’s the cause of most investment mistakes. Alas, it’s too potentially lucrative for many to pass up.
“Don’t do anything” is the best advice for most people most of the time, but it’s not intellectually stimulating enough for many people to take seriously. Most fields have a positive correlation between effort and results. Investing is one of few where the correlation is negative, especially for amateurs. The higher your IQ is, the harder it is to accept this.