ETF’s Are Ruining My Life

Here at Flip It FI we are big supporters of the passive buy and hold indexing strategy of Investment. If you don’t know what this is, check out J.L Collins Blog The Simple Path to Wealth, in particular the Stock Series and he will bring you up to speed far better than I ever could. In Canada, the cheapest way to implement this strategy is through a low fee brokerage account, Questrade in my case,  and a portfolio of Index ETF’s. I have only switched my investment over to ETF’s in the last year, after listening to the Choose FI podcast and reading Millennial Revolution’s Invest Workshop. Both are great resources that take you through all the nuts and bolts of setting up a portfolio.

Before this, all of my money was in mutual funds through Canada’s big banks, not ideal but far better than having done nothing. In order to understand why ETF’s are ruining my life you first need to understand the difference between a mutual fund and an ETF.

ETF’s Vs. Mutual Funds

ETF’s and Mutual Funds are actually very similar, they both hold a portfolio of securities (Stocks and Bonds or other similar investment vehicles). The big difference is that ETF’s trade in real time and mutual funds usually update at the end of the day.

Watching Your Money is Addicting

This created a problem, I could now watch what my money was doing every second of every day in real time and that’s just what I did. I was glued to the computer screen from market open to market close. As any experienced investor will tell you this is a recipe for disaster. The entire point of index investing is that what the market is doing today doesn’t really matter. The market goes up, it goes down, who cares as long as the long-term trends continue and your asset allocation stays in check.  Vanguard did a study recently on their top investors to see if they could highlight any trends on who was outperforming. What they found was surprising, the people who were doing the best were people who had died and coming in second were people who had forgotten that they had the account.

Come On Man

I knew all of this, I understood that I should just leave my money alone. But when you are paying as much attention to the market as I was and you have an engineer’s brain, which is pretty much hardwired to look for patterns, you start to convince yourself you are seeing them. For instance, I was sure that the market would jump up every payday when I would typically buy and promptly fall the following Monday. I was basing this “trend” on only four months of watching the market. This is obviously ridiculous, but I let it start to affect when I was putting in my buy orders.

Follow Your Plan

Finally, I had to take a hard look at what I was doing. I had a plan and it was well researched. Invest in a diversified portfolio of Index ETF’s, add as much money to this portfolio as possible each month and maintain a 90 / 10 asset allocation. This plan does not require tweaking on a daily basis, it probably doesn’t even need adjustment on a yearly basis. Watching the stock market every day was not helping my plan, if anything it was probably hurting it. So I finally stopped. I convinced myself that my time could be better spent doing something else. Something that would get me further down the path of FI, like writing this blog for instance or putting in a little extra effort at the office.

Have you ever had an FI related obsession that has gotten in the way of your life? How did you handle it?