OK, dummy, what have the past few months taught you about risk tolerance, FOMO, and investing? When it comes to finances, you need some sort of plan, and ignorance is most certainly not bliss for those first starting out and trying to figure out what to do with their money. But intentional financial ignorance is blissful indeed. Once solutions are found to the common personal finance problems, there comes a point when taking further action becomes more of a hinderance to investing returns. At that point, a set and forget approach remains the key to financial success and personal well-being.

Reflections on a speculative relapse

If you’ve been following along, I’ve recently deviated from reasonably sound musings toward the rantings of a madman, investing in meme stocks and, most recently, plunging into the hottest ETF on the planet. I allocated about 3% of my assets toward the ever-popular ARK funds, pretty near the absolute top. Those investments have received a significant haircut in the neighborhood of a 25% loss. Buy high, sell low baby (I’m not actually selling them).

As a hobby, I follow the markets pretty closely, despite my lack of classical training geared toward doing so. I am interested enough in personal finance to sporadically write blogs about money on the internet. As such, I am not immune to the disease of a good speculative frenzy. As Warren Buffet has said, bubbles happen because people see that the “guy next door, who they know is dumber than they are, is getting rich and they aren’t.” I might not be smarter than the guy next door, but I’m at least paying more attention. In this case, that inattention is what gives him the edge.

Intentional financial ignorance is bliss

You don’t want to be in a position of complete ignorance, with no Earthly idea what funds your 401k is invested in, or what a Roth IRA is, or how much you’re spending, etc. There are millions of people for whom ignorance is a very costly endeavor. But once a basic understanding of your financial situation is established, and automatic investments into low-cost funds are set, the average schmuck like me is best off re-acquainting themselves with the comforts of the weighted blanked that is sweet, sweet ignorance.

By tinkering with my own investment accounts, I’ve done myself more harm than good over the last few months. Not enough to mess with my timeline in any meaningful way—though I might have cost myself an extra week of work at some point 15 years from now—but enough for some temporary heartburn and anxiety along the way.  

When the market took a tumble at just about this time last year, it wasn’t fun to watch the numbers on my net worth dwindle, but I didn’t lose a second of sleep. My near 100% indexed funds were simply doing what the market is designed to do. Sometimes it goes up, sometimes it goes down. Decades of historic returns tell me that it will indeed go up again, and that I should reload with any spare gun powder I have lying around when it does take its natural nosedives.

But now, anything that I do outside of VTSAX carries with it the opportunity cost of not simply indexing. Now that I know better, I should know better. Or risk taking a 25% loss (as opposed to a percentage point or two) with highly volatile funds.

Tripling down on VTSAX

You’ll see plenty of blog posts and Boglehead threads extoling the virtues index investing and VTSAX, and rightfully so. I’ve done it plenty myself and will continue to do so. A super low-cost option that historically outperforms actively managed funds? Of course that’s the right path for 99.9% of people. But, human nature being what it is, and speculative euphoria being the drug of choice, it’s easy to look upon this last decade of paltry 15% returns (sarcastic emphasis on paltry) in search of the overnight 10x-ers that keep popping up on the news.

I’m not here to provide any new information. Merely, I aim to remind myself and others, as I’ve already reminded myself and ignored, about the virtues of passive investing. This time, I highlight this investing approaching not so much for the financial sense it makes, but rather the emotional one. 

From an economic sense, there isn’t much of an argument over the long term against market-tracking index funds. Outliers are prevalent in a bull market such as this, though. Some active managers and individual investors alike will indeed beat the market over time. But Lordy, I am not one of them.

Knowing how hard I’ve worked for money, and how hard it can be to come by, it is torture to watch it dwindle away in large quantities. Especially when that wound is self-inflicted. And especially when the alternative is so easy and so obvious.