Space Between the Notes

I always listen to what I can leave out.
-Miles Davis

 A lot of art, a lot of life, is made better by subtraction. The sparing use of musical notes or brush strokes or words in a sentence lends greater emphasis to those that remain. The space between the notes is like a showcase, almost a stage of its own.

A garden will have better results with fifteen carrots in a square foot than it will with fifty. Fifty looks more impressive when they first sprout, but they quickly crowd each other out. The patient use of space pays off when it counts.

Most people will get faster results by lifting weights two or three days per week instead of every day. It’s not the lifting of weights that makes you stronger – it’s recovering from lifting weights that makes you stronger. Without space to rest and repair, the workouts will weaken you over time.

In the course of managing an investment portfolio, it is easy to fall into the trap of wanting to always make things happen. Chase from one market to another. From one strategy to another. To keep adding new screens, more complex rules and metrics. These efforts seldom yield good results. The more effective course for most would be to do the opposite. Subtract.

Subtract Bad Habits

Many workable investment plans have been sabotaged by destructive traits. It doesn’t have to be one massively bad problem, just a continuous drip of poor impulse control or flickering amounts of “cheating” on the rules can be just as bad. In poker, these are called “leaks,” which is an apt description.

We do things like sell our winners too early, because it looks like the gain is getting away. We hold on to losers for too long, because we see some news that sounds favorable. We concentrate too much in a single position because it’s the only thing that’s working well right now. We don’t act when the rule says to buy because it doesn’t feel right. The list is endless.

Enforcing self-discipline may be the most difficult part of investing. It’s relatively easy to formulate a plan that addresses when to buy, when to sell, limits on position sizes, asset allocation, etc. It’s surprisingly difficult to allow a plan to work without the interference of our own natural impulses and bad habits.

Subtract Unnecessary Fees

When confronted with a choice between two, essentially identical, things, the lower cost option is the easy and correct choice. The only caveat here is that things that appear identical can sometimes have important differences. For example, two ETFs that represent the same market sector may have wildly different dividend yields or risk profiles.

Subtract Distractions and Bad Influences

Have you ever read a news article on a subject you are very familiar with and wondered how the reporter got everything so wrong? The same thing happens every day in the financial news. It’s very easy to find yourself swayed by things heard on the news or from friends or coworkers. So often, the news isn’t even true. Or it might be true, but unimportant. Or it might be true and important, but overshadowed by some other even more important news that you don’t know about yet.

We are especially vulnerable to being swayed by news we hope to be true. We tend to give a lot of credence to news we like and are dismissive of news that is counter to our beliefs. This gives us some cover, a way to rationalize bad behavior like bending investment rules. Fortunately, this is easily fixed. Stop reading market news. Stop watching CNBC. Just stop.

Unless your investment plan depends on specific news events to trigger decisions, and hopefully it doesn’t, there is nothing to be gained by watching. In fact, it’s worse than that. If watching market news and listening to stock market celebrities causes you to second guess your plan or occasionally bend the rules, it’s not just a waste of time – it’s costing you money.

Sometimes the simplest things can make an enormous difference.


Disclaimer: Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors. Talk to your financial advisor before making any investing decisions. Past performance is not indicative of future returns. Information displayed is taken from sources believed to be reliable but cannot be guaranteed. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. All indices are unmanaged and investors cannot invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved. Ideas and opinions expressed in this article are the sole responsibility of Patrick Crook/PLC Asset Management and do not reflect any stated opinions of LLP Financial LLC or any other person or entity.

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About Patrick Crook

Pat Crook is a financial advisor in Corvallis, Oregon with over twenty years of experience. He has developed a specialized form of investment portfolio management designed to address the risk concerns of those in or near retirement as well as organizations like charitable endowments and foundations. To learn more or set an appointment, he can be reached at 541.753.1808.