You cannot stir things apart.
This line comes from page 269 of James Gleick’s book The Information. I’m finding more and more examples in the investment world of just how true it is. You cannot stir things apart and you may not want to try.
World news and economic headlines often prompt investors to seek rapid change or a quick fix to what they perceive to be a problem. Here is a short list of recent things I have been asked to stir apart:
1) Rising oil prices lead some to dislike big oil companies. Oil company profits and share prices often rise during this time. If you’re paying for gas, don’t separate yourself from the oil company stock.
2) Outsourcing can infuriate those concerned about high unemployment here in the U.S. but the same programming jobs that were sent abroad returned many of the applications making all job hunts and other day-to-day tasks more efficient. The pros and cons cannot be stirred apart.
3) A deficit occurs when the government’s revenues fall short of spending in a particular year. The debt is the sum of all deficits ever run. (~Greg IP) The current deficit can’t be separated from the whole regardless of how much you stir.
4) Retirement assets are often saved in tax-deferred accounts to try and improve their growth over time but leaving them vulnerable to future tax rates. We don’t know what these rates will be in the future but we do know what they are now. Creating two pots of retirement savings (taxable and not) will likely be easier on you than trying to stir apart your income from your tax bill in retirement accounts like 401k plans when you are actually retired and dependent on what the stirring yields.
Successful investing comes from keeping emotional decision-making at a minimum while at the same time recognizing that each person’s tolerance for risk is unique and cannot be stirred apart from the individual. If you find yourself wanting to react to headline news, wanting to stir the pot or, even worse, tear it apart altogether, give me a call first.
Susan R. Linkous
“Susan On Money”