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4 things I learned from my dog about investing

When I was walking in the park the other day and ran into a few dogs, the brainstorming started. For me, these animals are absolute role models in many areas of life. So why not in investing as well?

Here you go. These are four things we can learn from man's best friend.

1. Stay true to your investment strategy

Dogs are the most loyal companions we could wish for. No matter what happens, they never let us down. You should also apply this kind of loyalty to your investments. Make yourself aware of your investment goals at the start, choose the right investment strategy and stay true to it. Constant back-and-forth not only costs you a lot of nerves, but also a lot of transaction costs that eat away at your returns. Numerous studies (most recently from the Wharton School of Finance, 2019) show that passive investment strategies have always outperformed active fund managers over the long run.

So why try to beat the market when you can comfortably build a diversified ETF portfolio?

2. Never loss the fun of investing

Ever watch a dog play? There are few things more entertaining. This may sound a little strange for a topic like investing, ETFs and retirement planning, but - have fun investing. Share ideas with friends, do challenges together. Here are a few examples:

  • Who has the highest savings rate in a month?
  • Who finds the best MSCI World ETF?
  • Who manages the best diversification?
  • Who reaches their investment goals first?

If you link the topic with gamification among friends, acquaintances or colleagues, then the whole topic takes on a completely different character. Of course, you should always take investing seriously and not make any return bets where you take big risks. But you should have a little fun.

3. Be curious and always learn more

Dogs are incredibly curious. Their curiosity knows few boundaries - a character trait that we as investors should definitely learn from. What I used to do when I was at university was to meet up with friends once a month and exchange ideas. Today, in the age of Slack and the like, this can of course be done much more efficiently and virtually, but the principle is the same.

On the one hand, you can constantly educate yourself through self-study. On the other hand, you can discuss specific topics within a community and benefit from each other. Use these network effects and share your experiences. Finances are - contrary to the opinion of many - NOT a taboo topic. Progress comes from exchange, not from isolation.

4. Only listen to people you really trust

Did you know that about 90% of decisions on the stock market are purely psychological? Herd instinct, fear and greed motivate people to take actions that the majority will bitterly regret a few years later. From a behavioral economics perspective, these observations make sense: We react much more sensitively to negative news than to positive news. The media noise and the opinions of so-called "crash prophets" constantly lead us into the temptation of making wrong decisions.

It's like flying an airplane. Significantly more people are afraid of flying than traveling by car - while the latter is much safer. However, car accidents are rarely reported, at least not with the same intensity as plane crashes. The media noise causes us to significantly overestimate the probability of a crash, and that's exactly how it is on the stock market. If you are broadly diversified and stay on the ball for the long term, you take minimal risk. The greatest risk is in the money that 42% of Germans park interest-free in their savings account (apart from their nest egg).

What do we learn from this? Educate yourself, question other opinions and make self-determined decisions - your dog doesn't listen to everyone, only to people he trusts and knows want the best for him. Crash prophets only want to sell their own products at the end of the day, don't do them the favor.

See you soon,
Your Carlos from Beyondsaving