In 2008, new Duke head football coach David Cutcliffe abruptly stopped the team’s first workout after only 30 minutes, calling the players together to deliver an unscheduled first impression of his squad. “In 30 years of coaching, you are the fattest, softest football team I’ve ever seen. But this is great! Just getting you into shape will be worth four wins.” In the previous four seasons, Duke had won a total of four games. Five years after Cutcliffe’s excited declaration about his fat football team, Duke won a division championship.
The big things in life are simply an accumulation of a lot of little things. As Muhammad Ali noted, it’s not the mountains that wear you out, it’s the pebble in your shoe.
Investors are too often hyper focused on trying to identify the next hot stock or avoid the next bear market, when they could vastly improve their performance by focusing on a few small things. But the little things aren’t exciting. It somehow feels more meaningful to sell all your stocks because you’re convinced that bum Trump or Biden is going to ruin the U.S. economy.
Instead of worrying about whether a rise of socialism or crony capitalism is going to crush the stock market, most people can vastly improve their investment performance by consistently doing three small things.
The first key to successful investing is pretty simple: do it. Get started. The easiest time to begin saving a significant portion of your income is when you are only a step or two above broke. If you’re reading this, you have enough income to be saving and investing.
Expenses matter. I met a woman recently who was paying an “investment helper” two percent annually to put her money into seven different index funds. I’m not sure why someone would own seven different index funds; across those funds the woman owned thousands of stocks. She could have easily replicated those holdings by owning a single world index fund – and thus avoiding the ridiculous two percent fee she was paying her advisor to … well, I’m not sure what she got for her two percent. Someone to babysit her index funds? Over time, excess fees are an enormous drain on your capital.
Finally, quit thinking you can guess the beginning of the next stock market decline. You can’t. Well, maybe you can, but only by dumb luck – which won’t do you any good unless you can also guess when the bear market is over.
If a person will simply begin investing, avoid high fees and not jump in and out of stocks, he can eventually make a lot of money – even if his returns are only average.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.