If you’ve ever dabbled in graphic design, you’re familiar with the concept of white space. When viewing an illustration, we typically pay the most attention to the visible ink on the page, such as a paragraph of text, a bar chart or an entertaining illustration. White space is the essential empty areas in between that are hidden in plain sight. We barely notice them … until they’re not there:

When making investment decisions, most people likewise assume that the most eye-catching ink is the most important: an alarming economic forecast, an exciting Initial Public Offering, hot trading tips. However, this assumption doesn’t hold up under evidence-based scrutiny. In reality, you have little or no control over how the most obvious news impacts your investments. The most exciting action has already been priced into any trade you might make well before you decide to make it.

“Nothing interesting happened in the stock market today.”

— said no financial journalist ever

Instead of fixating on the headline news, consider that liberating financial white space – the opposite of the headline news. The boring stuff. There, hidden in plain sight, you’ll find a number of powerful investment strategies that are freely available and far more within our control. In this series, I’ll introduce three of my favorite “plain sight (and boring)” investment strategies:

  1. Being there
  2. Managing for market risks
  3. Controlling costs

I emphasize these strategies because (1) they’re simple enough to apply once you know they’re there, (2) they can have a significant impact on your investment experience, and (3) I see too many investors ignoring them at their peril.

Plain-Sight Strategy #1: Being There

To receive a return on your investment, first you must invest (and stay invested).

Bottom line, you cannot expect your stash of cash to grow when it is lying fallow. It’s hard to imagine a more basic principle than that, so why do so few investors manage to embrace it? The answer is found in a sentiment you may have heard before: Investing is simple, but it’s not easy.

It’s relatively simple to accept the notion of no pain, no gain. To earn returns, you must put your assets at risk in ventures that are expected to compensate you for your faith that they will succeed … if they do. Then you must patiently await the desired success, knowing that it is expected but not guaranteed. The riskier the ventures, the less certain the outcomes, but the more you can expect to earn for enduring the uncertainty.

Instead, many investors panic when market risk arises and move their money to the proverbial sidelines. They also fret that they’re going to miss the boat when the market surges, so they pile into whatever is the latest success story. (And guess what, if you’re out of the market when the market surges, you have missed that boat.) This trend… selling to find safety, and then buying to follow the herd, happens far too often and is the opposite of what you need to do to succeed as an investor. (A 2014 Federal Reserve economic synopsis found annual damage of up to -5 percent attributable to return-chasing behavior.)

By chasing and fleeing hot and cold markets, you’re undesirably buying high and selling low. You’re also disregarding decades of empirical evidence that informs us that one of the best ways to capture long-term market growth is to build a solid, individualized plan, and to then stick to your plan by riding out the market’s near-term ebbs and flows. In other words, be there (and stay there).

With this simple strategy, you’re trusting that the market will continue to do what it has done for many decades when viewed from a long-term perspective: It has grown.

Why is it that so many investors ignore this common-sense approach – be there and stay there – and instead cut the cord during turbulent times?

Maybe because investing is simple, but it’s not easy… it’s simple to understand how the market’s gains and pains are so closely related. But it’s never easy to endure the pain and anxiety when it happens to you – whether that’s in the form of plummeting markets or tempting trends. Like a first-time skydiver, you cannot know how you’re going to react to a free-fall until you’re in it.

Why? Because we are human, and our brains are constantly sending us signals to try to protect us, regardless of whether the solution is in your long-term best interests. Research in behavioral finance informs us that, thanks to our most basic instincts, we’re subjected to a host of financially damaging biases, for example:

  • Herd mentality: conforming to the behavior of others (for example, instinctively rushing headlong into excitement when we see others doing the same).
  • Loss aversion:  fearing loss more than we crave winning, which leads to some interesting results when balancing risks and rewards.
  • Recency: paying more attention to your most recent experiences and downplaying the significance of long-term conditions.

These are just a few of the biases that can lead you astray during troubling “fight or flight” market conditions. This is why it’s a good idea to prepare for your investment leaps well in advance, preferably with a trusted advisor at your side to help you maintain your resolve.

In the next piece, I introduce a plain-sight strategy for managing challenging market risks and temptations, so you can be best equipped in your quest for long-term investment success.

After a successful career in high-tech, Sheila McGinn, CFP® followed her passion and became a fee-only Financial Planner, where she helps clients navigate complex financial decisions and reach their financial goals.

Disclaimer: This content is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. For advice specific to your situation, consult a financial planner, accountant, and/or legal counsel. Reproduction of this material is prohibited without written permission from Brightview Financial Solutions, LLC, and all rights are reserved.