How to invest in stock market? Be 'boring'; avoid investment fads and stick to proven methods for best return This allows investors to focus their energies on other aspects of financial health, such as budgeting, saving or long-term financial planning
A few days back, someone in my technology team pointed out a website called boringtechnology.club. The ‘Boring Technology’ principle was first advocated by Dan McKinley, a software engineer and former Etsy employee. McKinley introduced the concept of ‘choose boring technology’ in a blog post that gained popularity in the tech industry. The core idea is that while building systems or making technological choices, it’s often better to opt for well-established, proven technologies, rather than chasing the latest, trendiest options.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} A key element of McKinley’s essay is the idea of ‘innovation tokens’, which he describes as a limited resource that organisations should spend wisely. In the context of technology choices, McKinley suggests that companies have a finite capacity for innovation and should, therefore, be selective about where they decide to be cutting-edge. If a company uses up some of its innovation tokens in trying out a glamorous new technology that is not tried and tested widely, it will have fewer resources left for innovation in its business domain and in serving its customers.
As McKinley puts it, “If you think about innovation as a scarce resource, it starts to make less sense to also be on the front lines of innovating on databases. Or on programming paradigms. The point isn’t that these things can’t work. Of course, they can work. There are many examples of them actually working. But software that’s been around longer tends to need less care and feeding than software that just came out.”
He goes on to explain why he uses the word ‘boring’. “What counts as boring? That’s a little tricky. ‘Boring’ should not be conflated with ‘bad’. There is technology out there that is both boring and bad. You should not use any of that. But there are many choices of technology that are boring and good, or at least good enough. MySQL is boring. Postgres is boring PHP is boring. Python is boring.
Memcached is boring. Squid is boring. Cron is boring. The nice thing about boringness (so constrained) is that the capabilities of these things are well understood. More importantly, their failure modes are well understood.”
I’m not a technology person by education, but over the past few decades, I’ve managed and grown a business that does all its tech in-house, and I understand exactly what this idea signifies. However, beyond that, these ideas transfer perfectly to personal investing. By focusing primarily on well-established investment vehicles like diversified mutual funds or passive funds, investors can build a stable foundation for their portfolios. These are boring choices that have demonstrated their effectiveness over time and typically come with predictable outcomes. Meanwhile, you can spend the limited ‘innovation tokens’ on other carefully selected alternatives if you put in the effort to understand them.
The Boring Technology principle also brings in the importance of reducing cognitive load, which translates well to personal finance. McKinley comes to the conclusion that the total list of technologies that you use should be as few as possible. This also maps perfectly to investing. What are the boring things that you need to understand to be a successful investor? Diversification, asset allocation, large cap versus mid cap, cost averaging, and … actually, that’s the shortest list. This is all you need.
By sticking to simpler, well-understood investment concepts and strategies, individuals can avoid the stress and potential mistakes that come with constantly chasing the latest investment fads or attempting to time the market. This approach allows investors to focus their energies on other aspects of financial health, such as budgeting, saving or long-term financial planning, which is the equivalent of companies paying attention to their actual business rather than frivolities.
I don’t know whether I’ve been able to explain this idea effectively, but the Boring Technology concept, when applied to investing, encourages a balanced, thoughtful approach that prioritises consistency and proven methods over chasing the latest thing that claims to be innovation. It suggests that for most investors, a primarily boring portfolio, optionally supplemented with a few well-chosen innovation tokens, is the most effective path to long-term financial success.
The Author is CEO, VALUE RESEARCH
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
