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).
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.
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:
- saving enough,
- keeping costs low,
- ignoring the market ups and downs, and
- rebalancing from time to time.
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.