It can be hard to give up on the idea that investing should be exciting. Picking stocks can be fun, after all, and there’s nothing like getting your timing right and bragging about it later with friends.

Bad investing habits

Some people see investing as a goal, versus a means to reach a goal. For these folks, picking stocks is a hobby. They follow the gurus and soak up the financial media. They’re convinced they can build a consistently winning strategy by exploiting perceived mistakes in market prices. And yet, there’s ample evidence for why this is a bad strategy.

So why do people still try to “beat the market”? Part of the reason is the human tendency toward overconfidence. In the same way we all like to think of ourselves as above-average drivers, we all like to think of ourselves as above-average investors, too. But that’s simply not possible. A Duke University study of corporate executives published in 2010 found a dismal prediction record among a group expected to do well. (For what it’s worth, studies also show that men find it harder to accept that they won’t be able to beat the market than women do.)

While this research shows you’re not alone if you think you can beat the market, research also shows that a more successful investing strategy may be a less exciting one. An investment approach that advocates working with the market, diversifying around risks related to an expected return, trading efficiently, exercising discipline, and watching fees and taxes can feel boring. But it’s the best way to use investing to reach your goals.

Better investing

Changing your mindset about investing can help you become a better investor. The problem is, the elements in our nature that drive us to try and beat the market are hard to change. It’s nearly impossible to separate the urge for ego gratification from the need to build wealth patiently and efficiently.

So my advice is to separate your retirement investment nest egg. Make sure that investment account is well-funded, diversified, and invested using sound and patient principles. Then, give yourself some play money. If you really want to speculate on the market, you can. As long as your long-term retirement money is invested the boring way. This way, if you do happen to beat the markets, you can buy some (expensive) entertainment. If you don’t, you can accumulate a few war stories to share with friends. All without compromising the asset allocation designed for you by a financial advisor with you and your family in mind.

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