It may seem like a misnomer to discuss the wisdom of being ignorant. Ignorance, defined as a lack of knowledge or information, is not viewed as a positive attribute. But it is essential for our individual success – both financial and psychological.
We are ignorant to how cell phones transmit a voice instantaneously across the globe to another person. We know that when we take medicine it will make us feel better, but we are ignorant to how the pill interacts with our cells to make it all happen. We are grateful other people know this so we can benefit from their knowledge. If we were not ignorant about certain things, we would not have the capacity to become an expert or specialist in other things.
There is simply too much information for us to process everything. Selective attention and ignorance not only make the economies function, but they make us all need each other. We value each other and are grateful for others’ expertise where we are ignorant, and vice versa.
When it comes to investing, ignorance truly is bliss. The news story of the day, the quote of the hour and the unreliable predictions do not help investors achieve better results. To the contrary, studies have shown that investors that pay attention to such fleeting information trade more often and achieve lower returns.1 In addition, the constantly changing market information produces greater stress and anxiety, which may weigh heavily on our personal lives and relationships.
As we come upon the Thanksgiving season, we are grateful that we have a choice of what we pay attention to and what we ignore. We cannot control the volume, frequency, or insanity of information, but we can choose what we allow in our minds.
With investing there is always something to worry about; always has been, always will be. But that is your choice. We have not heard of a single person, on their death bed, who wished they would have watched the market more often. Be wise by exercising ignorance in those things that detract from your happiness and focus your time and attention on what really matters.
- Dalbar, Inc. Quantitative Analysis of Investor Behavior
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