Carl Richards on confusing investing with entertainment | Abnormal Returns

Investing Is Not Entertainment – Carl Richards

We get into trouble when we confuse investing with enter­tainment.

A decade or so ago, investing had become America’s fa­vorite spectator sport. Everywhere you went people were talking about finding the next hot stock, mutual fund, or alternative investment. Magazines with covers like “Ten Hot Funds to Buy Now” and “Five Stocks That Sizzle” made in­vesting sound fun. You couldn’t turn on the television with­out seeing some lout screaming “Buy! Buy! Buy!”

Most of the stock market coverage in the media was de­signed to appeal to our fantasies about getting rich quickly—our wildest financial hopes and dreams. And most of us were eager to swallow the story that we could get rich quickly in stocks. So, despite knowing at some level that market timing, stock picking, and day-trading are hazardous to our wealth, many people still did those things.

Source:  Carl Richards

Every one of those investors would have benefited from asking these questions: Am I investing to meet my most im­portant financial goals, or am I investing as a form of enter­tainment? Am I being realistic, or am I letting my fantasies run away with me?

Sure, investing is fun while you’re making money. And it’s fun to indulge in occasional daydreams about getting rich the easy way. But this is not Monopoly. This is real life. We’re dealing with real money and real goals. When we for­get that—when we confuse investing and entertainment—we almost always end up behaving badly.

So next time you are tempted to “play the stock market” maybe you should go to the movies instead.

Excerpted from The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. Published by Portfolio/Penguin. Copyright Carl Richards, 2012.

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