“The main purpose of the stock market is to make fools of as many men as possible.”
This quote by American financier and stock market speculator Bernard Baruch resonated well for me in this week’s The Week magazine, and seems particularly pertinent during these turbulent times in the financial markets.
I’ve never had much of a head for figures, and I certainly haven’t put any energy into playing the markets over the years. For me, a reasonably predictable income is all I crave, and I have always likened those who invest in stocks and shares to gamblers of a sort. I don’t judge it, but it’s not for me.
I do know people for whom speculating on the stock markets is a significant part of their life, and I have on occasion tried to assess whether I should be following their lead. It seems to me that part of the equation is the amount of time required to be able to predict the future performance of a company with anything more than a gut feel. To me, the fact that I don’t even read the day’s share prices every day must have saved me months of personal time over the years. What price do you put on that? Let alone the lying awake at night going through the numbers! Again, I sleep like a log every night. What’s that worth?
I guess those that do it are doing so consciously, and they too have weighed it all up. You might well be one of them. It takes intelligence, time and effort, and no doubt the rewards are there for some, otherwise there would be no market. But would that matter, I wonder? Would the world still spin if we all put our money away somewhere it can earn a nice steady compound interest over the years, and we can take it out when we finally need it? Put it in a nice safe place and forget about it.
The more I see the results of what has in effect been gambling on a macro level by organisations around the world, the more I think the Luddite approach I am advocating here has merit. I remember once sitting in a training room in San Francisco, with a fellow trainer on a Leadership course. This gentleman is to my mind a genius, one of the brightest and most dynamic individuals I know. He’s a Professor at Berkeley, and a serious investor.
It was about 4 years ago, and things were beginning to go wrong on the markets. I remember going up to do my session, and when I came and sat down next to him he told me that he had lost $50k on his portfolio during my session! He seemed relatively relaxed at the time, and no doubt took a long term view (which I suspect did not include the subsequent collapse of Lehman Brothers). We then did a rough calculation (he did the maths, of course) in which he concluded that if he had adopted my “leave it alone until it matures” strategy, he would have been much better off over the years.
So there’s my question for you: how much energy and time do you invest in activities which you could spend elsewhere more profitably? Have you fallen asleep at the wheel chasing something that doesn’t give you the return you deserve? Wakey wakey, it’s not a rehearsal!
Let me finish with another quote from Bernard, who seems to have a nice line in these. When asked how he handled seating plans for his regular dinner parties, he replied:
“Those who matter don’t mind, and those who mind don’t matter.”
This Blog was published in October 2011.
