The Realities of Pretend Investing

At the end of November, The New York Times ran an article by columnist and CFA Carl Richards that addresses how the tendency to invest based on emotion rather than reality can be dangerous to the investor. Richards contrasts “pretend” versus “real” investors as follows:

“Pretend” Investors “Real” Investors
Are drawn in by what they see and hear on television. Would never make an investment decision based on television news.
Think it makes sense to change investments based on events such as presidential election, Fed moves, etc. Change investments solely on what happens in their own lives, such as shifting of goals or financial situation.
Constantly monitor investments. Know it takes time to grow a portfolio, and watching too closely doesn’t serve them.
Talk about their investments excessively and try to use impressive jargon. Understand the difference between the global economy and their “personal economy.”
Worry about the news in “some far-off part of the world” and the potential impact on their portfolio. Focus on things they can control, like their level of savings and/or investment costs.
Complain “endlessly” about market volatility and external actions. Enjoy the benefits of a market that is “up more than 180 percent in the last 20 years.”