Investors constantly come to me with financial worries. One of their biggest worry is if they are earning enough return on their money. We’ve all had that experience before. Someone tells you about their investment winner and you’re envious. You think that if only you could get that return too, you wouldn’t have to worry so much about money. But the truth is, the key to not worrying about money has nothing to do with returns and everything to do with our Ego.
Ego is the biggest killer of investments. In my experience, and probable that of most of the investing world, trying to get better returns generally results in worse returns. See my blog on 3 Mistakes Most Investors Make and How To Avoid Them. It’s like trying to hold tightly onto sand. The tighter your grasp, the more seeps through your grip. Unless you are a master of your emotions when it comes to investing, such as Warren Buffet, and can buy when your emotions are screaming to sell, you probably cannot outperform the markets over a long period of time.
When Warren Buffet said “be fearful when others are greedy and greedy when others are fearful” he was demonstrating his knowledge of investments. Actually being able to do this is wisdom. Most people can’t. So how do we cut the ego out of investing?
They key to egoless investing is not to beat the market, but join it using index funds. Index funds remove the worry of beating the market because you are the market. That’s one less thing you have to worry about and one more opportunity to choose to be peaceful.
The added benefit of indexing are low fees. Index funds, such as Vanguard’s, have super low fees making your investing journey towards retirement lighter. Low fees, over time, can lead to better returns. The only challenge is that you have to have patience. It can take years or even decades to see the benefit of low fees. But the benefits far outweigh the cons. You aren’t worried about whether you are beating the market. You are the market. That’s why I am an indexer. It takes the ego out of investing and allows you to focus on things you can control, like how much you’re saving.