In life there are some simple practices when implemented regularly could change the quality of our existence. Simple does not mean easy. Flossing, when implemented daily, improves our dental health and makes that semi-annual trip to the dentist less painful and less scary. Good dental hygiene is a reliable predictor of good overall health and well-being. Is there a good investment hygiene that we could practice regularly that would enable us to make better decisions, improve the overall investment outcome and make that quarterly performance review with the investment committee less painful and more enjoyable? Perhaps there are a few things we could do in our investment process and execute daily with discipline.
First and foremost we need to trust that our investment policy will produce the right outcome in the long term if implemented correctly. Second we need to implement that policy consistently to allow our portfolio to do what it is supposed to do. Third we need to have discipline not to chase the latest investment fad – whether it is volatility arbitrage or the latest mega private equity fund.
Could investment decision making be a function of our physical, emotional, mental and dare I say spiritual hygiene? If we don’t take care of our body and spirit can we make the most optimal investment decisions under stressful conditions. A daily discipline of taking care of ourselves – exercising, eating healthy, sleeping well, nurturing our personal & professional relationships, being grateful for what we have in our lives (that is what spirituality means to me) – is very likely to spill over into our investment decision making process, where we make decisions not from a position of fragility or duress but from a healthy physical, mental and emotional foundation.
Investment hygiene simply means making decisions from an optimal state of body and mind, and having the discipline to follow through and implement those decisions consistently. Simple is not necessarily easy.