When it Comes to Investing, “Good Enough” is Good Enough

When-it-Comes-to-Investing-Good-Enough-is-Good-Enough

Is your refrigerator running?

Yes? Well you better go catch it!

HA! Chances are you’ve heard that silly little joke before. Maybe you even crank called someone with it when you were a kid. And I’m sure it was hilarious.

But you’re not here for silly jokes. You’re here to learn something about money. And if you read the title of this post, you’re here to learn a little something about investing.

Which is exactly what we’ll do. But first, let’s talk a little bit more about your fridge.

What’s your relationship like with your refrigerator?

I’m going to make a few wild guesses about your relationship with your refrigerator:

  • Your only expectation of your refrigerator is that it keeps your food cold.
  • As long as it’s keeping your food cold, you don’t spend any time thinking about it.
  • Literally any time.
  • You don’t spend time worrying about whether it’s the “best” refrigerator out there.
  • You don’t read articles or watch TV shows dedicated to telling you that you could be using a better refrigerator.
  • You don’t spend time wondering whether your neighbors or friends or family have a better refrigerator than you.
  • You don’t head over to Sears in your free time and wander through the refrigerator aisle wondering if you could get slightly better efficiency from another model.

Your refrigerator does its job. Its good enough to accomplish your goal (keeping your food cold).

That’s enough.

Why should you act differently with your investments?

People spend a lot of time worrying about finding the “best” investment strategy.

Pretty much everything we said above that you don’t do with your refrigerator? People do those things all the time when it comes to investing.

They pick something. And then they worry about whether they should have picked something better.

They read an article where someone is doing something different than what they’re doing, and they start thinking maybe they should be doing that other thing.

They hear some random piece of “news” and immediately wonder what it means for their investments.

They worry. They fret. They tinker.

It’s non-stop.

But why? Why should you think about your investment strategy any differently than you think about your refrigerator?

What’s your investment purpose?

Let me ask you this: what’s the most important part of your investment plan?

I’ll give you a hint: it’s not your returns. It’s also not your actual investments. Or the type of account you use. Or anything like that.

It’s your goal.

Pure and simple, your goal is the single most important part of your investment plan.

How much money do you want to have, and when do you want to have it? All the rest is a distant second.

So with that understanding, the only thing you need to ask yourself about your investment strategy is this: is it good enough to help you reach your goal if you do the other things you’re supposed to be doing, like:

You can stop worrying about whether or not your investment strategy is perfect (hint: there is no perfect strategy).

You can stop fretting over whether you chose the best strategy (hint: no one knows which one will be best).

Not only are those things impossible to predict, they simply don’t matter.

How will you look back?

I can say this with absolute certainty: when you look back 30 years from now you’ll be able to find an investment strategy that would have given you better returns than the one you chose. Probably a lot of them.

But if you’ve clearly defined your goals, and if 30 years down the road you’ve achieved those goals and you’re living a happy life, are you really going to care?

I certainly hope not. What I really hope is that you’d never even know because you’d be too busy actually enjoying yourself to care about something so silly.

So as you work today to figure out your investment strategy, I challenge you to look ahead just like you hope to be looking back 30 years from now.

Put aside words like “best” and “perfect”. They have no relevance to your goals. Focusing on them will do more harm than good.

Instead, work on choosing a strategy that’s “good enough” to get you to your goals. If you’d like some help with that, you can start here.

Once you’ve got that in place, treat it like your refrigerator. You know it’s good enough to do what you want it to do, so stop worrying about it. Just keep feeding it money and let it do its job.

If your refrigerator is running, there’s no need to chase it. It’s doing exactly what it’s supposed to be doing.

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25 Comments... Read them below or add one of your own
  • MyMoneyDesign March 17, 2014

    Good advice Matt; I like the refrigerator analogy. The bulk majority of my investments are set it and forget it. I’ll check in on them every now and again, but that’s about it. Once a year is the only time I ever spend deciding if I need to make changes.

  • Brian @ Luke1428 March 17, 2014

    We spend very little time tinkering with our investments. We have a solid plan in place for the long haul and there is no need to continually be adjusting it in an attempt to chase every dollar. I agree with MMD…look at it once, maybe twice a year max and make the appropriate changes.

    • Matt @ momanddadmoney March 17, 2014

      I’ll admit, I do actually look at ours more often, but solely as a record-keeping exercise. I like the thought of being able to look back 20 years from now and see how it moved up and down, so I keep track. But that’s pretty much the only reason I have for checking more often than once a year.

  • John S @ Frugal Rules March 17, 2014

    Great advice Matt! The crazy thing is that it’s not difficult to grasp, but so many make it that way. When I was working, my first question would almost always be something along the lines of what is your destination – ie. what is your goal. Some could answer that, but many could not and simply said they wanted all the returns they could get. That said, the overwhelming part of our portfolio is one that I spend very little time on, save for once or twice a year to see what might need to be changed.

    • Matt @ momanddadmoney March 17, 2014

      Yeah, it’s crazy how much most investment “experts” focus on pushing returns without ever stopping to think about the goal. Returns are only meaningful if they’re actually helping you achieve something.

  • Michael Solari March 17, 2014

    I honestly got that prank call when I was in high school! Good post. Everything needs to start with goals. Then and only then should you design your portfolio.

  • Andrew March 17, 2014

    When it comes to money, everyone wants to optimize and tinker with it to get the best return possible. Understandable, but in the end, all that tinkering is probably not a good thing. Plus, there are a lot of marketers out there doing a good job trying to sell a bigger and better “refrigerator.” Once in a while I get that urge, but for the most part, I just set it and forget it.

    • Matt @ momanddadmoney March 17, 2014

      Yep, lots of people trying to convince you to buy the latest and greatest fridge/investment strategy. Being able to tune it out is a hugely beneficial skill.

  • Done by Forty March 17, 2014

    I love the metaphor, because my refrigerator is literally older than I am. It came with the house, matched the beige stove and dishwasher (which also work and are certainly ‘good enough’), and we have never had the urge to replace them.

    Coinstant tinkering has to be the biggest mistake young investors make, myself included. Once a year I think, man, I need to change my AA!

    • Matt @ momanddadmoney March 17, 2014

      It’s definitely tempting to try and tinker. There are lots of areas of life where tinkering is actually a good thing so it can be hard to just let things be. But it’s such a proven strategy at this point that I feel pretty comfortable with it now.

  • Survive The Valley March 17, 2014

    Excellent, excellent, point. Investing is definitely one area where good enough is truly “good enough”. Otherwise you’re going to drive yourself crazy up the wall second-guessing.

    • Matt @ momanddadmoney March 17, 2014

      Agreed. Not only does the tinkering usually lead to lower returns, but it creates a lot of unnecessary stress. Knowing enough to leave things well enough alone is a huge advantage.

  • Prudence Debtfree March 17, 2014

    Well said, Matt! I actually did make crank calls with that joke about the refrigerator – how embarrassing. Worry is such a life-sucker, and while some of us have a hard time embracing self-discipline regarding money without worry, I believe it can be done. I like your vision of being too busy and happy in 30 years (more like 10 for me) to care about investment strategies that would have resulted in greater yields. When you’re happy with life as a whole, good enough is indeed good enough.

    • Matt @ momanddadmoney March 19, 2014

      Haha, it was a classic back in the day! I love what you say at the end there about being happy with life as a whole. It really doesn’t matter how you compare to others, or whether you have the “best” thing, if you can just learn to be happy.

  • Oh no! That’s not going to help my campaign to convince Mr PoP that we need a better fridge sometime in 2015 or 2016! I secretly hope one breaks in the duplex so we can send ours over there and get a better one for ourselves… =)

    But with investments, we’re really boring and I think that’s only ever helped us. We check balances once a month to record progress because we know that looking at it much more often than that gets me a little worked up if that balance at the end of the month is lower than mid month.

    • Matt @ momanddadmoney March 19, 2014

      Haha! If you want to send my the address of the duplex, I know a guy who specializes in situations just like this…

  • E.M. March 17, 2014

    This is a great mentality to have. We worry about so many other things on a daily basis, do we really need to add another thing to the list? Personally, I don’t think I would want to spend so much time contemplating an investment strategy. I like simple approaches that are effective.

  • Laurie @thefrugalfarmer March 18, 2014

    AWESOME post, Matt. We used to be like that with our investments and thankfully, only look at them quarterly now. What a huge relief!

    • Matt @ momanddadmoney March 19, 2014

      Thanks Laurie! From what I can tell, you guys have done an awesome job gathering information and figuring out an investment plan that works for you. It’s a great example of how to do things right.

  • Shannon Ryan March 18, 2014

    Love this, Matt! The refrigerator analogy is perfect. I agree wholeheartedly – the most important thing is knowing what your goals are. Once you know them, it’s much easier to pick appropriate investments and stay focused on the bigger picture. If all you care about are the returns, then every valley or peak is going to make you cheer or cry and that is an incredibly exhausting way to invest. A lot of times when I meet with perspective clients, they want to immediately learn where I plan to invest their money and what kind of returns I expect, whereas all I want to talk about is their goals. And it always surprises me how many people don’t have authentic goals.

    • Matt @ momanddadmoney March 19, 2014

      That’s always sad to hear, but unfortunately often true. I think it has a lot to do with the media, which focuses incessantly on returns and never on personal goals. But in the end, the goals are all that matter.

  • FeelingFinancial March 29, 2014

    I really like how far you can take the fridge analogy. Of course you’ll spend some time researching and picking a decent (not perfect) fridge if you have to buy one, just like you’d want to get your investing going in the right direction. But if you spend any more than a few hours, you’re looking for entertainment or something else – not just a fridge.

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