I know this sounds like a dumb question, and I’m not sure if my thoughts on it are any less dumb, haha, but after seeing this tweet by financial blogger and author Jonathan Clements, I realized something about myself that I didn’t know previously…
That thing I realized?
That I don’t even *look* at how much an investment costs anymore, no less even *know* what I’ve paid for them!
Whenever it’s time to re-invest in my VTSAX I just pour in the money and then call it a day… I couldn’t even tell you what it’s trading for these days… $50/share? $100? (Just looked… $72.02 – right in the middle! ;))
I wondered why this is as it seems pretty RIDICULOUS, particularly coming from someone who’s obsessed with tracking his pennies, but after a little rumination it started becoming clearer:
- When I have the money to invest, I’m going to invest it no matter what the share price is, so whether I look at it or not it really doesn’t matter
- I never try to time the market anymore, so again no reason to check the share price…
- And lastly, if a good investment is a good investment, then it’ll still be a good investment when the price is higher or lower or somewhere in between – at least in the general sense (obviously if it drops 50% or something then something’s up, but with index/mutual funds it’s rarely the case compared to other less diversified or individual stocks)
- Oh, and then I also only invest for *the long term* – so the daily fluctuations matter less and less over time, although of course you prefer to pick up shares on the cheap in a perfect world…
And I should probably clarify here that when I say *investments*, I mean *stock investments* – not other kinds like rental properties or business opportunities or even handfuls of gold coins when of course you *would* want to pay close attention to the costs ;) I’m crazy, but not that crazy!
And again I’m not saying my thoughts here are completely justified, or that even looking at the price in the first place is bad in any way (it’s prob. smart to be aware of, even if it doesn’t change anything!), it just shocked me pretty good when I realized I no longer did it anymore and was wondering why…
I literally couldn’t tell you the last time I even noticed a share price – can you?! Did you check the last price of the shares you recently picked up? How about when you last contributed to your 401(k)?!
Actually – 401(k)s are a perfect parallel of how I treat this investing stuff… With 401(k)s you invest your money every two weeks no matter what the prices are, the only difference is that it’s *automated* so you probably don’t pay attention as much compared to investing on the side.
But you DO know investing is important because it all adds up over time, so you continue pouring it in without second thought even if you don’t know exactly how much you’re paying for them. If anything, you’re more aware of the fund *fees* than the share costs since that’s the biggest part us bloggers like to harp on! Haha…
All this is important to think about because it means deep down you really DO want to be invested and not obsessing about the ups and down like day traders do, but you also want to know you’re doing things at least 80% good which is why 401(k)s – in my opinion – are so beneficial. You just set it up and forget it, and then watch all that money and their respective matches compound over time and voila! You’re left with a nice nest egg!
So why not apply that same mentality to your outside investments too?! It’s not like you’re always going to be paying top dollar for investments just because you’re not paying attention to their prices… Some buys will be high, and others will be low, but over time dollar cost averaging will more than work out in your favor and is all better than waiting for that perfect time that may never come…
At any rate, that’s my latest epiphany and thought you might get something out of it… even if you think I’m a complete whack job now and never want to read the blog again ;)
I’m still processing it all, but would love to hear your thoughts about this, and especially if you don’t pay attention to the share prices when you’re investing either, haha…
I KNOW I’M NOT ALONE HERE! Someone back me up!!
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I agree with you when it comes to index funds. Especially when you have bought at multiple valuations over many years. It all gets lost in the noise, which in this case is a good thing.
But when you take the time to invest in individual stocks it is more difficult to forget what you paid for it.
I only have one individual stock that I have held long-term [like, more than a decade]. And I still can’t forget that I paid $10.75 per share.
Of course, that’s probably because of the warm fuzzy feeling I get because it has knocked it out of the park and is sitting at $46.44 now. :)
Heyo!!!
I agree with you. I do believe that newbies to investing are anxious. The first stock I purchased (back in the 80’s) was for a now defunct airline. I watched that stock daily, made myself sick over it. I sold after less than 6 months because I was not sleeping. That’s when I found mutual funds and never looked back.
Pretty good you figured it out in only 6 months! Took me years to finally get to that point myself :)
Twice a month, money is deposited into a TD Ameritrade account for our HSA. I pay attention to the price of SPTM (the closest all-market fund they have to VTI) in that I divide the funds available into SPTM’s price. If it’s close to the next even share, I’ll place a limit order for the day at the price it would take to buy that extra share — usually within a couple dozen cents of the current trading price. And usually I’ll get it. It’s not like I’m saving all that much, but it’s a low-stakes fun gamble.
That is a fun way to do it – I’ll approve it ;)
I’m with you on this. I decide if I want and investment and then just buy it. My retirement account was automated to buy certain things every pay period and I never checked the price. I turned out OK.
Dr. Cory S. Fawcett
Prescription for Financial Success
I’m usually with you, but I recently got my grubby little hands on an extra six figures and I’m waiting for us to FINALLY go into a recession before I invest it. Maybe that’s not the best strategy? Meanwhile we are still regularly investing in our 401(k) and HSA.
Oooh la la!!!
Hard to go wrong no matter what you do there since you’re a new owner of 6 figs haha… You’re already winning! :)
Yeah, you addressed this somewhat, but it really does depend on your timeline. For my 401k I just set and forget given my timeline is 22 years away from 1st withdraw (ideally).
I don’t have stock investments, but I do have a SEP-IRA. Like a 401(k), I invest at regular intervals (monthly, when I get my check) regardless of stock price. I’m sure I’ll treat any investments (once I get to that point) the same way. I don’t think I have the wherewithal to track and time the market, so I’ll just have to accept whatever stock prices are at the time I’m ready to buy. A bit boring, I suppose, but I feel like the stock market is “exciting” (read: potentially terrifying) enough on its own. So I only need so much excitement.
Haha, true that…
J.
Good, relevant post. I have been practicing value cost averaging as a way to help take the emotions out of what to do when an investment feels (and maybe ‘is’) too expensive. I got the idea from Jason Kelly’s book.
That’s funny because I immediately thought of something different: the TV shows on buying and selling houses or apartments.
My mom loves these shows, so I’ve watched a few, and on the “selling” side, almost every time people set their price so they would make “back” whatever they spent when they bought. Forgetting however much they spent then would have allowed them to set the market price and be done with it.
Yup, emotions def. play a large role in this stuff! Sometimes for the better, but other times not so much :)
There was a study a few years back that shows the most successful investing accounts tend to belong to those who forget about them. Psychology plays a huge role in investing success and failure. Not watching price is just one way you can avoid the urge to meddle too much.
YES!!! And that *dead people* often have the best returns too because they’re not looking or taking action, obviously! Always fascinating to see, haha…
https://twocents.lifehacker.com/the-best-investors-literally-forget-about-their-portfol-1782581085
Thanks, J, about the winning, but I’m actually looking for advice I’m used to handling the normal amount of money we get each month but having a bunch to invest at once and not screw up is a little overwhelming.
I hear that..
See if one of these articles might help you?!
https://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/
https://jlcollinsnh.com/2013/05/22/stocks-part-xviii-investing-in-a-raging-bull/
My personal opinion is to use the money however you’re already using your own money in terms of strategy/goals/etc. It’s a larger number than normal but your goals have probably remained the same, yeah? I’d also just sit on the money for a while too and let it all sink in which usually helps calm the nerves a bit as well :)
Great post!
I really don’t try to time the market either. Like you say, my 401(k) is completely automated and I try not to look at it very often. Maybe once a month I will login to my 401(k) account (primarily for entertainment purposes) but I don’t plan on making an changes anytime soon.
I do have a regular brokerage account too. I use one of the commission-free brokerages now which makes it easy to dollar cost average into individual stocks. I buy 3-5 shares at a time without worrying too much about the price.
That’s an excellent hurdle to not have to deal with… And I swear more people would invest if they knew there were places where transaction costs are waived :(
Hello J. Money,
you’re not alone. I don’t look at share prices, either—what’s more, I even disabled the automatic display of the total portfolio value in my online banking and thus stopped closely tracking my net worth. I wholeheartedly agree with the four points you made (invest when the money is there/never try to time the market/a good investment is a good investment/daily fluctuations don’t matter in the long run).
When I have money to invest, I look up the share price to find out how many shares I can afford given the current price and my amount to be invested, place the order, and that’s that. Then I write the data (date/price/number of shares) on a piece of paper, put in in an envelope safely tucked away, and retrieve the envelope with all my manual records once a year to update my master excelsheet.
Even without the exact net worth number, I know that I’m still years from retiring. But then again I’m only invested in plain old boring low-fee ETFs and perfectly happy with that. Why should I bother now with the details?
Haha… you had me at master spreadsheet ;)