Investing - an active or passive occupation?

Posted on 27 November 2012 by Douglas Chadwick

I am back on my old Hobby Horse of whether investing should be an active or passive occupation. The world of economics and politics are in chaos and we therefore live in a continuum of change and uncertainty. The people from the emerging economies expect more of the good things in life, whilst the people from the old economies are trying to protect these same rights that they had in the past. Technology in all its forms advances at an enormous pace, but in particular in the field of communications. News moves faster and there are fewer secrets. We have almost instant access to the smallest and the largest changes on the planet as they happen, and this includes financial information. So why oh why do the financial powers that be, and many pundits, still insist that investing is a passive occupation? In today's world this defies all logical argument. They expect us to make one off decisions with our ISAs and SIPPs in the belief that when they fall they will recover in the years to come, because that 's what has happened in the past.
 
Some fifty years ago I was the Navigator on a Jamaican Banana boat plying between London and Kingston Jamaica. During the hurricane season if we were unlucky enough to be in the path of one of these tropical storms the most important thing to have was regular accurate information on the storms speed and direction. This was supplied by the brave men from the American Coastguard who flew their planes into the eye of the storm and kept us informed of its progress. Armed with this information we would alter direction, slow down, speed up, turn around, do anything to try to keep the ship and its crew safe in the South West quadrant of the storm. This is the safest quadrant and the storm in theory will run away North from you leaving you free to continue safely to your destination.
 
You can see the point I am making with this story. If you have accurate continuous information you do not have to let circumstances do what they will with you and your investments. Modern trading platforms are cheap and quick to use. Computers and concerns like Saltydog Investor give you information instantly on a regular basis. You do not need to go down with the ship. Be ACTIVE and protect your ISAs and Sipps from the economic storms that have for the moment become our way of life. This is not rocket science, it is an obvious course of action.