This article, by Justin Baiocchi, was originally published in The Northern Daily Leader on 24 October 2015.
As every parent in the world knows, there is no handbook to raising children handed out by the midwife or nurse at the same time as they give you your tiny, screaming little bundle of joy. Within a short while, however, most parents could probably write their own how-to manual. It might contain a useful checklist for new parents: Lack of sleep? Check. Not enough hands? Check. A semi-trailer too small to fit everything you need for a trip to the supermarket? Check. No social life? Check. No money in the bank? Check. The one item which would be missing, as this is obviously a secret which parents are sworn to never divulge, and which will come as a shock to any new parent, is the most important one: the unbelievable mess that children can create. I am constantly amazed that such small people can create such an enormous mess. It’s as though there are no boundaries for children: food is just as likely to be found in the bedroom as the kitchen; toys are apparently equally at home in the toy box and in the toilet bowl; clothes can be kept in both the wardrobe and the microwave oven. Some days when I get home from work my first instinct is to call the police, for surely the house has been ransacked and Liz and the kids have been abducted, based on the devastation which greets me when I open the front door. Always however, Liz will have just left the kids to their own devices for five minutes, more than enough time for them to simulate a nuclear detonation inside the house.
So a large part of being a parent is spent tidying and cleaning up – when you have children every day is spring cleaning day. Do not, however, adopt the same approach with your share portfolio. Your investments don’t need to be looked at every hour or changes made every day. If you have made the appropriate initial investment decision, you don’t need to fiddle with your portfolio on a constant basis. You don’t even need to know how the share prices are changing day by day, although these days it’s almost impossible to escape the financial news entirely. A dusty mountain of academic research has shown that the more you chop and change your share portfolio, the lower your returns are likely to be. Invariably you end up selling your best investments and swapping into bad ones and never mind the taxes and transaction costs. You can’t ignore your children, especially when they’re showing you how they figured out how to work the stove, but you can ignore your share portfolio. Do it and be wealthier for it.