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2 Forgotten Rules of Investing

In today's world, where financial information is available at the click of a button, we often get trapped in the minutia of our portfolios. Mathew Emmert explores two forgotten rules of investing that can refocus us on the big picture.

Why do we forget the easy stuff? Oh yeah, because it's easy. If it were hard, we might be more apt to remember it. But then, of course, it wouldn't be called the easy stuff anymore. My head hurts. But I digress.
With all the online financial calculators available out there -- not to mention the palm-sized computers stuffed in our pockets -- we find ourselves having to do very little math these days. I won't try to cover in this article whether or not that's a good thing (and I heard you cheering, anyway). I will, however, say that I believe we grow complacent when the financial information that can partly determine the quality of our lives is simply handed to us on a silver platter.

It's just too easy to forget the financial magnitude of what we're trying to accomplish for our families and ourselves when we get a nice, neat number handed to us with the click of a mouse. It can create a situation where we focus more on the end result than on our overall goals and the steps we must take to achieve them. We just plug in a few numbers and we see that we'll save $24 per month on our mortgage payment if we refinance, so we do. Or perhaps that handy yield-to-call calculator says this bond meets our yield requirement, so we buy it.

Folks may or may not be making the right decisions here, but my point is this: If you're spending more time trying to get to that magic little yes or no from such tools and less time thinking about the big picture, it will cost you.

Have you spent as much time thinking realistically about how long you expect to live in your home as you have the details of refinancing your mortgage for the third time? Yield-to-call is a great tool, but have you really determined whether or not you should be buying bonds in the first place?

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