Richard Thaler won the 2017 Nobel Prize in economics for his work on how humans may not act as rationally as economists' models assume. The acclaimed U.S. economist also happens to help run a highly successful hedge fund: Fuller & Thaler Asset Management, which has almost doubled the S&P 500's gains since the beginning of the bull market in 2009.
In his 2015 book "Misbehaving," Thaler summarizes his advice for how to get around an instinctive aversion to loss and invest successfully yourself, which he says is pretty simple: Opt for a mix of investments, mostly stocks; only check your portfolio about once a year; and don't follow the news.
Just set it and forget it.
"Whenever anyone asks me for investment advice, I tell them to buy a diversified portfolio heavily tilted toward stocks, especially if they are young," he writes, "and then scrupulously avoid reading anything in the newspaper aside from the sports section."
Investing legend Warren Buffett agrees that you should ignore the noise. "Anything can happen anytime in markets," he wrote in the 2014 Berkshire Hathaway Annual Report. "Market forecasters will fill your ear but will never fill your wallet."
"No matter what the headlines say … American business is going to do fine over time," Buffett said more recently, in an interview with Judy Woodruff of PBS NewsHour. "Occasionally we go off the tracks with bubbles … but it will never permanently derail us."
Markets go up and down every day, but that doesn't necessarily mean there's significance to every move. As an investor, it helps to be patient and to accept a certain level of uncertainty. Remember, you should be in it for the long term.
It also helps to stay away from the financial section of the newspaper, says Thaler: "Crossword puzzles are acceptable," but that's it.
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