One of the really neat things I’ve learned over the years is to use symbolic shorthand. I distinctly remember a first day in a Suffolk University class called “The Psychology of Women,” and the professor wrote two simple symbols on the chalk board (I know I’m dating myself now) to say “This is the class you’re in.”
As a long time student of psychology, I’ve observed over and over that people HATE change, even if it’s a good change. Change makes humans uncomfortable. I’ve created a shorthand graphic of my own that symbolizes how most people seem to feel about a lot of things: “No Change!” It would look something like this using a mash up of the symbols for “no” and delta (the triangle symbol) for “change.”
One thing that has not changed is Warren Buffett publishing his annual letter to shareholders in Berkshire Hathaway. In the upcoming version, Warren Buffett looks back at a pair of his real estate purchases and the lessons they offer for equity investors. It’s a great read and I recommend that you click through to it here in John Mauldin’s Outside the Box. There are many classic Warren Buffett quotes in it, but here are two that resonated with me:
“With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.”
“Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations and accompanying commentators delivering an implied message of “Don’t just sit there — do something.” For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.”
The Periodic Table of Investment Returns depicts annual returns for eight asset classes, ranked from best to worst. Each asset class is color-coded for easy tracking. Well-known, industry-standard market indexes are used as proxies for each asset class. We use the version that SEI Trust publishes called Destination: DIVERSIFICATION, Asset Class Returns: Annual Returns for Key Indices (1994-2013) Asset Allocation Risk and Reward: Annual Returns (1926-2013).
The notable box to focus on is the plain gray one representing the 60/40 diversified portfolio which is actually the most popular choice of our clients and a typical traditional mix. How appropriate! Gray for dull and boring–no change. The observation that always occurs to me is that the gray 60/40 box is never the best and never the worst and most often in the middle, right where most people are most comfortable.
So in conclusion, if like most people you like no change, our advice is, “Just sit there–do nothing.” No change might be the best course after all.