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The Benefits of Systematic Investing


Published 4/25/14
Updated 8/18/15

The biggest pitfall of modern investing is the ease with which transactions can be made.

You get a steady stream of distracting and ***URGENT!*** financial information from various television shows and internet sources.  If one of the ideas seems worthwhile, you can log into your discount brokerage and buy and sell stocks in a matter of seconds.

Just Because You Can Doesn’t Mean You Should

Just because you can gather copious amounts of fast-twitch information and act on it quickly does not mean it is a good idea.

Some of the greatest investors do the exact opposite; they do almost nothing.  Warren Buffet is famous for buying a great business and holding it for years.

Charlie Munger (Warren Buffett’s right-hand-man) has an excellent quote on the art of doing nothing:

“Assiduity is the ability to sit on your ass and do nothing until a great opportunities presents itself”

Hold Stocks Like You Live in Them

The vast majority of us don’t buy and sell our house because the value went up or down 5%, or because we are worried about a recession 2 years from now.  Intuitively, we know this just doesn’t make sense.

We don’t constantly flip our houses because it is not easy to do so.  It requires great effort to move.   If selling stock required the same amount of work many DIY investors (and institutional investors for that matter) would be much better off – they’d be forced to only make investment decisions they feel would be beneficial in the long run.

Investing is Simple

Systematic investing has the power to curb emotional buying and selling.  By following simple rules – like The 8 Rules of Dividend Investing – you can act with your logical side instead of your emotional side.

Implementing and following rules allows the rational part of your brain to create a framework that the emotional side must follow.  If we limit ourselves to only buying and selling based on a limited set of rules, we eliminate behavioral mistakes.

Investing is simple.

  1. Buy great businesses at attractive prices that reward shareholders
  2. Hold on and watch your investment compound year after year

We needlessly complicate the process by becoming engrossed in the next quarterly report, or guessing at the implications of a Russian sanctions on oil prices.  In the long-term, the only thing that matters is investing in businesses that are going to grow profitably for the foreseeable future.

Do yourself a favor and check out from the 24 hour investment new cycle.  Invest systematically for the long-term.  Invest with confidence.

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