Why You Should be a ‘Do Nothing’ Investor

If you’re reading this eletter, it probably means you have some interest in stock markets.

And if you have some interest in stock markets, you probably own stocks.

And if you own stocks, there’s a fair chance your portfolio has gone nowhere fast for the past three years.

That’s frustrating. You want big gains right? Isn’t that the point of buying stocks?

So, just how can you make big gains in a market that’s just about going nowhere? The answer may surprise you…

Most investors (not just novices) love doing something.

They love clicking through stock charts, or checking out balance sheets or a company’s mining project.

We know that’s true, because your editor is like that too (although, not so much with the charts).

Doing that is fine. In fact, we recommend it. The more interest you can take in your investments or prospective investments, the better.

However, while that’s fine, it’s what most investors do next that’s the problem.

Put down that red cordial

There are currently 2,139 stocks on the Australian Securities Exchange (ASX).

And to listen to some investors talk, you’d think their goal is to own every single one of them.

After all, that can be the only reason why they insist on searching the market every single day for a stock to buy. And if they can’t find a stock to buy, they break out in a cold sweat, uttering the words, ‘Must…do…something!’

The reality is, investing doesn’t have to involve ‘doing something’.

In fact (cliché warning), sometimes the best investment decisions you make involves doing absolutely nothing.

Yes, that has become a cliché. But being a cliché doesn’t make it less true.

This is why we launched the Total Income investment advisory last year. Until that point, most of our investment advisories were based around ‘doing stuff’, searching for big gains.

As we say, that’s fine. However, it’s not always necessary to ‘do stuff’. And thankfully, not every investor wants to ‘do stuff’.

So the aim of Total Income was to show investors that you don’t have to be high on red cordial in order to invest. You can be just as successful an investor by relaxing…and doing relatively little.

In fact, after crunching a bunch of numbers and doing some research, Total Income editor, Matt Hibbard, has shown your editor compelling evidence that a ‘do nothing’ approach is possibly the best thing any investor can do.

A way to boost stock market gains
(for next to no extra work)

Matt reminded us this week of a neat trick that he says in some cases can help investors more than triple their gains from owning a stock.

It doesn’t involve leverage, if that’s what you’re thinking.

And it doesn’t involve options — Matt leaves that strategy to his Options Trader service.

It’s a simple ‘trick’ that any investor can use, and apply to hundreds of ASX-listed stocks.

It’s so simple, that most investors either don’t know about it or don’t appreciate its usefulness.

Most who do know about it, probably think that it’s boring (which it is). Apparently, making money in a boring way doesn’t appeal to them. They’d prefer to make money in an exciting way.

Heck, we know plenty of investors who prefer to lose money in an exciting way rather than make money in a boring way! Strange, but true.

Exactly what is this ‘trick’ all about? And what’s more, is it legal? The answer to the second question is most definitely ‘yes’. As for the answer to the first, we’ll give you more details in tomorrow’s Money Morning.


From the Port Phillip Publishing Library

Special Report: Central banks are losing control. Their efforts to prop up asset markets are failing. We’re now entering the endgame. What will the endgame look like? What are the short and long term investment implications? And how can you navigate this period of hyper central banking intervention…and emerge from the other side with a healthy portfolio? Vern Gowdie is one of the few minds in Australia with clear answers to these questions…[more]

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

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