Ritholtz: Just Do Nothing

Investors spend a lot of time worrying about — and often acting on — the latest economic reports. But Barry Ritholtz says what they most often should do in such situations is nothing.

“The advantage of nothing is that you, as an investor, trader, forecaster or strategist add very little. Indeed, you probably are a negative,” Ritholtz says in a Bloomberg View column. “Every time you do something, you add costs, tax bills, commissions, expenses. If what you did was only neutral, if you did no harm, then that vigorish would tip most of your activities into the red. But you should be so lucky as to do no harm. Most of what you do is a negative — and that is before we add up the costs.”

But, Ritholtz says, “There seems to be a belief that ‘I should be doing something, right?'” To that he says, “No, you shouldn’t. For the most part, you should be doing as little as possible.” That’s the case with today’s monthly unemployment report, he says. “Why should this preliminary, soon-to-be-revised, eventually re-benchmarked single data point in a never ending series matter to your portfolios?” he asks. “That is the question you should be pondering.”

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