“Worrying is a serious offense”

I was in Scotland recently for a wonderful holiday with my wife. We got up one morning and, quite typically, it was about 50 degrees and windy, with rain coming down sideways. In other words, it was beach weather in Scotland. Accordingly, my wife decided we would visit one of Scotland’s great beaches. (That sounded to me like visiting one of the great ski slopes at home in San Diego, but I digress.)

So off we went.

Happily, by the time we wound our way to the appropriate spot on the tiny roads of the Scottish Highlands, the rain had stopped. However, getting to our destination was going to require a three and one-half mile one-way trek across pasture, moor and dunes. But the end result was indeed a beautiful beach (above right).

My point relates to the pasture. There was a gate that allowed us to access and cross the pasture on our way to the beach, on which was posted a prominent sign (at left). The owner of the property was very clear that dogs needed to be kept on leads due to the threat of “worrying” the farm animals and that offending dogs would be shot.

Note the key final phrase: “Worrying is a serious offense.” That statement is similarly true in the investment world even though its meaning is slightly different.

When we worry about our investments, we tend to look at our statements more. When that happens, we see losses more often (only 53 percent of trading days are positive for stocks even though the S&P 500, for example, has returned in excess of 11 percent per year from inception) and thus trade too often because we are so loss averse (we feel losses roughly two to two-and-one-half times more strongly than commensurate gains). We chase performance to our detriment. The net result of this worrying is substantially lower returns.

For most of us most of the time, worrying will surely be counterproductive. It will lead to bad decisions and poor returns. So please, remember, worrying is a serious offense.