Simplicity and discipline, the invisible benefits of investing in ETFs

Less people noticed simplicity and discipline are two great benefits of investing in ETFs that are invisible. ETFs are really a good thing, which is one of the reasons why I keep posting some ETF articles on this blog to communicate with my friends.

Table of Contents

Factors hindering investment success

The first purpose of investing, as Buffett said, is not to lose money. I would like to extend him further, at least to keep your assets from shrinking. Inflation, interest rates, and market volatility are systemic risks that most ordinary people cannot afford to deal with. Relatively speaking; individual company factors, personal mistakes, risk-taking, derivative financial products, etc. are all unsystematic risks. For inflation and interest rates, see my previous blog post “The most two serious killers to investors: inflation and interest rate.”

If investors can eliminate as much as possible factors that may cause your assets to depreciate on the long-term road of asset investment and accumulation, then the speed of asset investment and accumulation will be higher, and your goals will be realized as soon as possible. You can also retire earlier than your peers.

Exclude unsystematic risk

When systemic risks beyond the control of ordinary people occur, the assets of all people will shrink together. But if you have too much unsystematic risk along the way of investing and accumulating assets, your assets will shrink more than others. On the contrary, if you can try to eliminate or reduce unsystematic risk as much as possible, your assets will shrink less than others, and you will be richer than most people. Because whether a person is rich or not is the result of comparison with everyone in the society.

Most people rarely think so thoroughly. I remember George Soros had a very similar experience and speech. He said, “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.”

To invest in ETFs tracking broad market, you must give up the biggest advantage of active stock selection, which is to give up the excess returns of some excellent companies. This is a must. However, invest in ETFs tracking broad market can also eliminate the biggest disadvantage of active stock selection by comparison, without risking the wrong stock selection or the risk of a sharp drop in assets caused by the performance of individual stocks.

Reduce complexity

In addition, investing in ETFs tracking broad market has the advantage of reducing investors’ subjective judgment errors, emotional ups and downs, or being affected by noise. Investors simply need to remain focused on putting their money into a specific selected ETF tracking broad market. If you are afraid of forgetting, you can buy selected ETF tracking broad market through dollar cost averaging or even automatic orders placement in your stock trading platform. By doing so, you can forget other things, such as long-term accumulation of assets, portfolio rebalancing, dividend reinvestment and other complicated things, operational errors, take profit, stop loss… all have nothing to do with you.

Discipline

Of course, all of the above must rely on the investor’s self-control, that is, the implementation of discipline. Because investing in ETFs tracking broad market is already the easiest, least complicated and most reliable way for investors to accumulate asset. Basically, investors only need to do one thing: “Buy when you have money, and don’t sell under any circumstances.” If you can’t discipline yourself in this no-brainer way of investing, I personally don’t think you can find any else to invest and get rich.

Disclaimer

The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.