The Trick to Enjoying a Vacation (and Investing Successfully)

Think for a moment about your favorite vacation that you’ve taken in the last 10 years.

Where did you go (i.e., what city or general geographical area)?
Where did you stay (i.e., what did you select for hotel/lodging)?
Where did you eat?
What activities did you do?

This was a vacation that you truly enjoyed. But how likely is it that the vacation you ended up taking was the very best vacation possible for you? Even if you enjoyed it immensely, given how many possible destinations there are, and how many different places to stay, places to eat, and activities to do at any given destination, it’s almost certain that there’s some other possible vacation that you would have enjoyed more. An almost infinite number of better vacations, probably.

And yet, you still had a great vacation. A vacation that you’ll remember for the rest of your life.

Those can both be true. It was an amazing vacation. And there were many thousands of other vacations you could have taken instead, which you would have enjoyed even more.

But here’s the critical point: while you’re actually on vacation, if you spend the whole time thinking about some other vacation you could be on instead, that is not helpful. It’s much better to just enjoy the vacation you’re on.

In the context of vacations, most of us know that intuitively. But the same principle applies to your portfolio and investment policy statement (i.e., asset allocation, rebalancing plan, and fund selection).

No matter what you pick, there’s going to be countless other options that would have been better. There’s no avoiding that. That’s just how it works, given how many options there are. But as long as your original decision was reasonably well informed, it’s not helpful to spend a bunch of time looking at other allocations, other mutual funds, or other individual stocks that you could have selected instead. Looking at all the ways you “missed out” is very likely to lead to regret, and it may lead to performance chasing or other poor decisions.

There are only a handful of questions to ask: