Last week I tore up old monthly statements and trade confirmations. If I ever need them the brokers or I can find them online. As I shredded, I thought about what I had bought and sold. Here’s what I decided:
First, the time I devoted to managing my assets could not be justified by the money I made.
I would have done just as well putting everything in a few equity index funds. Some years I beat the S&P 500, other years I lagged. Over the long haul, my little hobby assembled the equivalent of a few index funds. The fact that I spent frugally, maximized retirement contributions, opened a SEP-IRA, and had several promotions contributed more to my net worth than occasionally exceeding the market averages.
Second, the time I devoted to my investments was immense. Year after year, I read the Wall Street Journal and New York Times each morning, and Saturdays began with Barrons.
I did online research to monitor my portfolio and identify new purchases. I avoided the financial news television shows — too much chatter, too many advertisements — but I spent many hours reading reports from two brokerage firms. On average I spent one hour a day on the markets, which over 30 years is nearly 11,000 hours, more than five years of 40-hour work weeks.
Third, I don’t regret what I did. It was satisfying. I’ll bet most rookie investors indulge fantasies as they trade. For me, it was the career path seriously considered but not taken: the M.I.T. Sloan School admissions and the CBS investor relations job set aside to teach and write. No corporate 9-to-5 for me, but I could still show anyone that I would have been a decent analyst or portfolio manager.
Shifting from fantasies to reality, amateur investing is a great education. Anyone who does it seriously must read critically: the flood of news and opinion has to be filtered. I like to ask what has changed, a natural question for a historian like myself to pose. And what is trustworthy? Do analysts admit their mistakes? How do I translate their jargon? What aren’t they talking about? So I became a better reader. I also had to read widely: following the markets is like taking an interdisciplinary major in economics, politics, and psychology.
Gaps in my understanding of this nation and the world closed.
Furthermore, investing your own money is good for the soul, contrary to the lurid media depictions of unethical traders. The difficulty of doing better than the market teaches humility. It is hard work to come close to what a few superstars like Warren Buffet achieve. Mistakes will always happen. Brilliant insights go awry. And the markets also teach patience. When I started investing I would get so excited after placing an order that it was hard to concentrate for the rest of the day. But as one journalist quipped in the 1960s, “the stock doesn’t know you own it.”
Over time I became calm —calmer than normal — when I bought or sold, aware that my best gains were in stocks, bonds, and funds I’d owned for years, not weeks.
Finally, the serious amateurs can help their friends. We can pass on good ideas and share our recent trades — we can but we should not. Far better to urge our friends to be cautious. When they ask me for tips, I reply with questions. Do you have an investment strategy? Is your portfolio diversified? How much time and energy do you want to devote to the market? Did you sleep well in the fall of 2008?
I suppose I could have written another book in those 11,000 hours. But I don’t think I would be a better person, and I’m sure I would not know the world as well.
Robert L. Hampel is a professor and former director at University of Delaware’s School of Education and author of “Fast and Curious: A History of Shortcuts in American Education.”