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How Type A’s Sabotage Their Investment Success

I love my Type A family and friends, I really do. They are so energetic and have such “can do” attitudes! Type As tend to be optimistic and proactive, and I prefer to be around people like that. I think you become more like the people you associate with.

A “can do” and proactive approach will serve you well in most areas of your life. Effort and hard work usually produce success. Whether it is in your career, family life, exercise, or whatever other challenges present themselves, “working the problem” usually helps.

Since I have a finance background and enjoy volunteering, I have several Type A family members and friends whom I assist with their investments. To a man/woman, they predictably and diligently apply their hard work mantra to their investing activities. Their approach almost invariably is, “I need to work hard at investing if I want to be successful at it. I can’t just sit idly by and expect my investments to grow. I need to make decisions and take action. If Tim says I can make 8% per year on my money with a ‘buy and hold’ (lazy!) portfolio, I’m sure I can earn 10%, maybe even 15%, if I just apply myself!”

It is only natural for Type As to think this way.

Natural, but also, as it turns out, misguided.

Investing is different from a lot of other disciplines, in that active managing of it can be harmful. There are a couple of reasons why “active investing,” which I define as trading your portfolio on a daily, weekly, or even monthly basis, is a loser’s game. First, let’s explore the issue of trying to “time” the market. This is an investing strategy whereby one attempts to beat the market by anticipating major economic developments or company news announcements. This is a mistake. Do you really believe you can predict next quarter’s GDP number more accurately than the 50 top economists in the nation, which is where Wall Street traders get their economic information? Do you think you can forecast Google’s upcoming earnings results better than the top management of Google, who also have the ability to trade Google stock (albeit with some restrictions)?

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