Stop the Noise: Keep Your Life & Investments Simple

This is a guest post by Barbara Friedberg.

Our life is frittered away by details..simplify, simplify. – Henry David Thoreau

The distractions are everywhere. Thoreau noticed it over 100 years ago, and he didn’t even have the Internet. Today, it’s worse. Pay attention, or you will get swallowed up in minutia.

As I was working in the library on the preparation for the MBA class I’m teaching at a local college, I headed to the periodical section for a quick read of the Wall Street Journal. Before I arrived at the Wall Street Journal, I looked at most of the covers of the magazines on display. I was especially struck with O Magazine’s cover story about how to get rid of clutter. But, I forced myself not to get distracted, a major feat in and of itself! Because I really wanted to read the clutter article.

Next, I pulled out the Wall Street Journal; STOOD next to a table, did not sit down, and divided the paper up. I knew from experience that only about 10-15% would be of interest, so I challenged myself to skim the relevant sections RAPIDLY.

Then it hit me. There are so many distractions everyday, it’s amazing I get anything done at all. (Unfortunately, some days I don’t get much done!)

I reminded myself that part of enjoying life & being productive is separating the important from the unimportant. In fact, that applies to almost any aspect of life.

Pareto’s Principal indicates that there is not a 1 to 1 relationship between the amount of work you put in and how much you benefit from that work. In fact, according to dictionary.com:

Pareto’s principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.

With that in mind, I am constantly trying to find the 20% effort that will give me the 80% results. (Unless I’m just feeling lazy!) Believe me, it is more difficult than it sounds.

But I am certain of one thing, cutting out as much external and unnecessary activity, such as obsessing, surfing the net, wandering around etc. adds to my contentment and productivity.

Practical Application: A Simple Investing Plan

How does this relate to personal finance? First off, you can ditch most of what your read about getting rich, investing, etc.

Investing is very simple. There are only a few things to do to grow your wealth!

  • Invest regularly
  • Place your investing dollars in 2 or 3 low cost index funds. The Vanguard Total World Stock Index Fund (VTWSX) and Vanguard Total Bond Market Index Fund (VBMFX) are two examples.
  • Subtract your age from 100 and put that percent in the index fund; Put the rest in the bond fund.

Let’s say that you are 32 years old.

Step 1: 100-32=68; Put 68% of your investing dollars in stocks.

Step 2: 100-68=32: Put 32% in bonds.

If you start with $300 per month starting at age 32, you’ll have invested $144,000 in 30 years but you’ll have a total of $485,150!*

*Assumption: 7% compounded annual rate of return long term (9% from the stock fund & 5% from the bond fund; in line with historical averages).

If you did nothing more than this, you would be financially ahead of most. If you are more ambitious, you could increase the amount you invest and start earlier. The principle remains the same.

Many people will try to sell you lots of products and tell you about a myriad of investments, but most of these investments will not improve your performance any more than the above example.

In fact, the greatest determinants of long term investing returns are:

  • Time in the market; the longer, the better.
  • Diversification; A widely diversified portfolio yields the best long term results with the least risk.

When presented with an investment idea or product, ask yourself these 3 questions:

  • In order to invest in this product how much will I have to pay and to whom?
  • How does the investment work and is it complicated?
  • Is the name of the investment long, complicated and confusing?

If your 11 year old kid can’t understand it, walk away.

Keep your life and your investments simple.

Do not be afraid to walk away if the article, activity, or person is adding to the noise.

If nothing else, get rid of superfluous activity for one day. Practice a NOISE fast.

Readers, what “noise” do you have in your life? What are simple investing rules you use to weed out the bad investments?

This is a guest post by Barbara Friedberg, MBA, MS. She is committed to Educate, Inspire, Motivate for Wealth in Money and Life at her site, where she provides instruction and motivation for becoming wealthy by teaching basic personal and financial wealth building principles.

5 Responses to Stop the Noise: Keep Your Life & Investments Simple

  1. Everyday Tips says:

    I am convinced that the internet is the biggest time waster in the world. (But I still love it :) )

    I find that I check my email too much, check stock price too much, and then worry some when the market is getting slammed. I almost never take action on those down market days, so I don’t even know why I pay such close attention. I guess I feel information is power, but it really isn’t necessary.

    If I unplugged my computer, my house would be in pristine condition and I would weigh 15 pounds less… :)

    • Barb Friedberg says:

      @Everyday Tips, I totally understand! Very well put! All the “efficiency” created by the internet is quickly eaten up by our mindless “surfing.” Best regards, Barb

  2. News media and other people’s opinions are a lot of the noise I tend to shut out. I really enjoy not watching the news and maybe checking popular media once a week since the vast majority of it simply doesn’t affect me and is constantly negative.

    Still learning to be more productive on the internet, which in and of itself seems to be a bit of an oxymoron!

    You’re right though with your comments above about investing… it’s so incredibly simple, yet the vast majority of people just don’t do it.

  3. James says:

    i like your quick and dirty “100” principal. i think it makes it easy and i can see people buying into it.

  4. Barb Friedberg says:

    @Ryan-I too have cut way back on watching news tv, yet, I also have to balance that with making sure I am not totally uninformed-a constant balancing act.
    @James-Investing is not as difficult as the “product sellers” would like one to believe. Always watch out for those who want to sell you something where the seller “benefits.”
    Best regards,
    Barb

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