Let me start off by saying that investing in ASX shares is a great thing. If you're already invested in ASX shares, or even if you aren't yet, but have a firm plan to, you're doing yourself and your future a great service.
However, though the potential benefits of investing in shares are enormous, there's also a risk that investors hobble their potential returns by going about it in the wrong way.
Over the past two decades, the process of investing has become exponentially easier. Gone are the days when you would need to call up a stock broker if you wished to buy ASX shares. These days, online brokers and phone apps have made the process wildly more simple.
But whilst this trend has opened up the world of investing to more people than ever before, it doesn't come without some drawbacks.
One of those drawbacks is how easy it has become to buy and sell ASX shares on the fly.
When you had to make a phone call to trade on the stock market and usually pay exorbitant brokerage fees in the process, you really had to stew on a potential buy or sell decision.
But today, with a trade taking just a few seconds on a mobile phone and with brokerage costs falling to nearly nothing, investing is almost too easy.
Many investors therefore fall into a trap. They feel like investing successfully means they have to constantly trade… to do something and be active in managing their portfolio. This could be the constant chase of the next 'hot trend' or else a restless nature that compels regular but unnecessary portfolio tinkering.
For these investors, doing nothing can feel like doing the wrong thing.
Image source: Getty Images
Investing in ASX shares: Less is more
But this could be a huge mistake.
Most of the successful stock market investors advocate the benefits of inaction, of 'lazy' investing. Of making long-term decisions and shying away from acting on emotions or a whim.
This is exactly what renowned AMP economist Shane Oliver has recently warned investors against in an edition of 'Oliver's Insights'.
Oliver quotes the legendary Warren Buffett to begin with:
Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
He goes on to say that
Unless you really want to put a lot of time into trading, it's advisable to only invest in assets you would be comfortable holding for the long term. This is less risky than constantly tinkering in response to predictions of short-term changes in value and all the noise around investment markets.
He also includes a more colourful quote from economist Paul Samuelson:
Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.
This advice goes well with another famous Warren Buffett quote. According to CNBC, Buffett once told a university class that :
I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it, so that you had 20 punches — representing all the investments that you got to make in a lifetime. And once you'd punch through the card, you couldn't make any more investments at all.
…you'd really have to think carefully about what you did, and you'd be forced to load up on what you really think about. So you'd do much better…
But what you can't do is get rich by trying one new idea every day.
I think all of this is great advice for all investors to keep in mind. But especially new participants in the stock market, who are probably most at risk from thinking they need to be constantly active in order to be successful at investing.
