Equal and Opposite

"For every action, there is an equal and opposite reaction."

Newton’s Third Law of Motion.

I love this time of year (clean slate and all that) - but right now none of us can move for advice about how we might all want to “improve” ourselves over the coming twelve months or so.

Setting aside the slightly ‘happy clappy’ notion of whether any of us actually even need to improve ourselves - almost everyone in the country will have woken up on the 1st January with some idea of how they would like to look, how they would like to feel, how they would like their lives to be twelve months down the road.

More successful, healthier, smarter, better looking - whatever it is, this time of year will always be characterised by a manic swirl of activity to try and put ourselves on whatever course we feel will lead to betterment. Just try and get a spot in a gym in South London at the moment.

One of the frustrating things about self-improvement, or I guess when trying to achieve anything in life, is that the road to “success” is often not clearly marked.

Sometimes, in order to get something that we really want, we might need to do the polar opposite of what we might think is required.

Put another way, and paraphrasing Newton, taking one action might lead to a completely counter-intuitive (but desired) reaction.

Taking time for rest and recovery is a necessity if we want to become fitter.

Reading more, allows me to become a better writer.

Higher productivity demands focus on one task at a time (doing less) in the short term.

Great marketing repels as many people as it attracts.

These are just four examples I have thought up on the spot. I am sure that you can think of a number of times in life where you really, really wanted something - and no matter how hard you tried you just couldn’t seem to reach it.

And so, fed up and a bit disheartened, you probably stopped trying. At which point that thing you craved just sort of, happened.

The universe works in very mysterious ways sometimes.

When we think of how to improve as investors, we might think that as a starter for ten we need to put in the intellectual legwork - studying the markets, researching the work of the great investors, keeping abrest of world events.

Not only will this not help you to become a better investor, there is a very real danger that it causes you to become a worse investor. Too much knowledge can be a very dangerous thing.

The only tools that you really need as an investor, once you have a base understanding of how capital markets work, lie inside you. Specifically in your ability to do as little as possible to get in your own way.

Putting in loads of extra effort does not guarantee you a better outcome in this game, often quite the opposite and this can be infuriating to professional investors that spend their lives devoted to their craft.

When the market moves against the “learned” professional investor, quite often rather than looking inward and examining his own process and decision making - he instead derides the market as being “irrational”.

A reminder - the market as an entity in and of itself is neither rational nor irrational. It is simply a place where hundreds of millions of investors come to trade securities every day. If you don’t like the price that’s quoted, that’s fine - but plenty of other people seem to.

If anyone is irrational, it’s people.

Managing our personal finances should not be a high effort activity. If we adopt a sensible investment strategy and stick to it for long enough, we have a very good chance of getting a better outcome than people who invest day in, day out for a living. Isn’t that amazing?

Yes, it is true that we cannot adopt a low maintenance approach to managing our finances all of the time. Life changes, the world changes - from time to time circumstances will demand answers to big, expensive questions. And it’s my job to help people to answer them.

But, as a default setting, we should try to do as little as possible. For sitting on our hands (an action) represents our best chance of investing success beyond our wildest dreams (an equal and opposite reaction).