Readers of this blog are likely familiar with the Oblivious Investor blog. Its author, Mike Piper, is a frequent commenter here. (He signs as ObliviousInvestor. It’s an SEO thing.) And it’s been on my blogroll for a long while now.
So, naturally, when Mike put out a book version of his blog, Oblivious Investing: Building Wealth by Ignoring the Noise, he bravely sent me a free copy in the hopes that I would say something nice about it. You have to admire his courage. I rarely say nice things.
I was a little worried myself, but truthfully I have only two significant problems with this work.
1) It takes the form of a fictional narrative, which I find annoying.
2) It doesn’t fully explore some topics that I think are interesting.
In other words, it’s not written the way I would have written it, and that’s an objection I have to almost everything.
The core thesis of Oblivious Investing is that a person should invest passively both in the sense that they should favor equity index funds and in the sense that having established a good plan they should stay the course through thick and thin, remaining oblivious to the news of the day. Where Mike parts company with mainstream advice is his understanding of where the real challenge in that lies. “The hard part isn’t coming up with a good investment plan. The hard part is sticking with it.”
That said, most of the relatively short book is taken up with making a case for a good investment plan based on regular investments into an equity index fund. Avoid individual stocks, active mutual funds, and fixed income. Of course, the book also stresses the importance of sticking with this plan in the face of short-term volatility. In the end, the main character is rewarded for her perseverance when the market was going down.
I am sympathetic to the thesis that conquering your own emotions of fear and greed is the hard part. I just wish Mike had spent more time in the book exploring why that is the hard part. It may only apply to over-educated intellectuals like me, but I find arguments for cures that include an explanation of the workings of the disease to be more convincing. Without a story about human psychology and the tricks our heads play on us in certain situations, it is too easy for people like me to think that, although this might make sense for some, we don’t need to be oblivious because we are enlightened and perfectly logical in our decisions.
Mike teases a little on this topic on the very first page, describing checking your fund balances and moving your money from place to place as “attempts to exert control over something that we simply cannot control.” Exactly so. The compulsion to do something when you lose money (or see others making more money) is a powerful human impulse. It’s the basic instinct of reacting to a negative stimulus.
When I worked at a large investment firm and things went bad we used to tell each other “Don’t just do something, stand there!” If anything, that is harder for pros to do, because they have clients who expect to hear about the steps their manager is taking to fix whatever the problem was that caused the fund to lose money. Experienced fund managers often have a little repertoire of meaningless and harmless “actions” that they can take in such situations to appease the clients.
But my modest disappointments with Oblivious Investing can be largely attributed to the fact that I am not the intended audience for it. Unlike me, Mike actually spends his days giving practical advice to those who need it, rather than just criticizing the advice of others. And this book is aimed at those end-users.
I would never recommend a single book to person just beginning to learn about investing. But I might recommend half a dozen good books, because I think that getting several perspectives and understanding where reasonable people disagree is vital. And Oblivious Investing might be one of those six. Now, if I can only find the other five….