You’ve said it. I’ve said it. Your children or nieces or nephews have said it. Our usual response to these two little words is to recommend doing something about it.
You tell children to go outside. You pick up a new book or go to the movies. I head out on my mountain bike. But what if we’ve got it backward? What if boredom helps us make better decisions, particularly money decisions?
I bring up boredom because, in recent weeks, some people have pointed to it as an explanation for the actions of all sorts of investors:
■ ”Rich valuations and extreme bullishness may look like signs of euphoria, but other evidence suggests that investors are more bored than thrilled. Trading volumes in American stocks and some bonds, notably Treasury instruments, are close to their lowest levels in at least five years.” — Conrad De Aenlle, The New York Times
■ ”The newest complaint against mutual funds is not that their fees are too high or that they don’t beat the indexes often enough. It’s that they are boring. … The performance chase, all in all, is a poor antidote to boredom. Losing money can get monotonous too.” — Chet Currier, Bloomberg
I’m not sure that viewing investors as bored is the right way to think about it. It’s probably more accurate to say some people are bored with their investments. John Moran, director of RBC Wealth Management’s New York complex, has spent some time studying this issue. “Boredom isn’t necessarily bad,” he said. “Wealth is built over time and we’re not in the excitement game.”
So if you’re one of those people who is bored, I have a question: Where did you get the idea that investing should be exciting?
When done correctly, investing should look a lot like growing a giant oak tree. It’s boring, but as Warren Buffett said, someone is sitting in the shade of an oak tree today because someone did the boring work of planting and taking care of it decades ago.
In other words, it might be short-term boring, but in the long term, it’s very exciting. What would happen if you tried to make the process of growing an oak tree more exciting? Perhaps you’d dig up the tree at the end of every month to see if the roots are growing. It might make things more interesting, but you’d do enough damage that you’d never end up with any shade.
The idea that investing should be exciting makes a great story line for the movies, but it’s not real life. I know you see people who look like they are having fun in the markets, but they’re traders. Based on many decades of evidence, most of them don’t make as much money as you might think. Sure it looks entertaining, but try it for a while. You’ll find out that it really isn’t much fun. In fact, it’s much more enjoyable and cheaper in the end to go to the movies instead.
But, let’s say that you’re truly bored with your investments, and you simply have to spice things up a bit. I have a few suggestions for you if you’ve completely forgotten the visceral feeling of outsize risk.
1. Buy a bunch of shares of your favorite Internet company. Make sure it is something you use all the time. Something like Facebook, Google or even Apple. Those are great because then you get the added benefit of being able to tell people you own them. In fact, Twitter might be the best. Everyone knows Twitter is cool.
2. Get a T-shirt that declares your purchase. Personalize it with “I own 100 shares of Twitter! How do you like me NOW?” That way people will see your shirt and congratulate you on your exciting investment.
3. Buy at least one book about trading options. Option trading is where non-boring investors go for real excitement. You can learn about naked puts, long straddles and iron butterflies. It’s definitely not boring!
4. Replace your money market fund with a junk bond exchange-traded fund. I saved the best for last. Right now, your boring money market fund might be yielding less than 1 percent annually. If you swapped it out for the products Michael Milken made famous in the 1980s, things can get exciting real fast. Just add your money to the more-than $12 billion that is in the iShares High Yield Corporate Bond ETF. Its symbol is HYG, and it is currently yielding more than 5 percent annually!
Of course, all of these things come with huge risk, but how else are you going to avoid being bored by your investments? What fun would it be if there weren’t t at least a chance of losing vast amounts of money at any moment? The risk is what will keep you up at night, and it will get you up early in the morning to check if you still have any money. Nothing is more exciting than logging in to your brokerage account to see if there’s still anything there. Just think: It’s like Christmas, only in reverse.
Clearly, there’s no reason to be bored… at least until your balance drops to zero.
This commentary originally appeared August 18 on NYTimes.com
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