Everyone Needs a 'Too Hard' Pile For Financial Information

A few years ago I wrote about my "too hard" pile for investments.

Coined by Berkshire Hathaway vice chairman Charlie Munger, Berkshire’s "too hard" pile encompasses investments that Munger and Berkshire CEO/chair Warren Buffett ignore because they deem them to be outside of their circle of competence.

In my own piece, however, I noted I had taken that concept to heart with my own investments: individual stocks, most actively-managed funds, leveraged-type investments, and frequent rebalancing all land on my "too hard" pile.

As I reflected on the concept of "too hard" I realised I’ve developed a similar culling process with respect to economic and investment information. "Too hard" is probably a bit of a misnomer – it’s more like "don’t bother." In the interest of time and staying out of rabbit holes that are unlikely to matter at all for my investments or my work, and/or because I don’t find them inherently interesting, I ignore entire giant categories of financial information coming my way. Alternatively, the headline might be sufficient for my needs. (McDonald’s CEO out? Inflation easing a wee bit? Got it.) That editing process gives me time to focus on economic and market news and data that do matter to me.

And I would emphasise "matter to me." It’s up to each of us to decide what financial information we care about and what’s just noise. The point is to have a system that helps you avoid becoming overwhelmed with incoming information. In that spirit, here’s a short list of the financial information categories that I routinely ignore.

Individual Economic Data Points

I pay attention to broad economic trends – for example, the rate of inflation and economic growth. They don’t affect how I manage my investments, but they obviously have a huge influence on the world we live in and how the markets behave. I wouldn’t want to ignore this stuff altogether; it’s interesting. But you won’t find me hanging on the latest employment figure or inflation reading. That’s because individual data points can be noisy on a one-off basis, so fixating on them can be a waste of time.

Seasoned economic experts – and seasoned consumers of any type of statistical data – will tell you that what matters is the mosaic of data points over a period of months, not a single reading. I pay attention to broad trends and try to read what people like Schwab’s Liz Ann Sonders and Morningstar’s Preston Caldwell have to say rather than trying to decipher the tea leaves on my own.

Short-Term Market Forecasts

It’s true, I do compile an annual list of various investment providers' capital markets forecasts – their outlooks for the returns from the major asset classes. That’s because I believe that you need to plug some kind of return expectation (as well as an inflation forecast) into your financial planning calculations. Without a sense of what long-term market returns are apt to be, how else would you know how much you should save or how much you can reasonably spend in retirement?

But those capital markets expectations in my annual compendium are 10-year numbers or longer. Meanwhile, short-term forecasts (say, for rest of this year or next year) are notoriously unreliable. Even when such forecasts incorporate sober, bottom-up inputs (equity valuations, dividend yields, and expectations of P/E multiple expansion or contraction) rather than just a finger in the wind, the market can stay over- or undervalued for much longer than several months or a year. That casts doubt on the utility of short-term forecasts for anything but chatter on CNBC.

Short-Term Market News

In a similar vein, I pretty much ignore the market’s short-term performance. (Are you picking up on a pattern here?) Every so often, for a temperature check on the market, I’ll glance at year-to-date returns for various types of investments, and longer-term returns, too. But very short-term performance is, in the words of Macbeth, "full of sound and fury, signifying nothing." Once in a while there will be a very good – or very terrible – day or week in the market that will catch everyone’s attention, even non-financial media.

The tricky thing is, sometimes that notable day or week is the start of some really dramatic, extended market movement. At other times, however, a massive market move will be incredibly short-lived, almost a head fake. The broader point is that I don’t make any changes to my portfolio based on these short-term market moves, and I would suggest that investors do the same. And I don’t find short-term market action inherently interesting, either. So tuning it out is an easy call. (Don’t even get me started on how little I care about the specific point level of the Dow, S&P 500, or Nasdaq at any given time.)

Corporate Comings and Goings

Sure, sometimes you plug into news about individual companies because you want to be part of the cultural conversation. Remember when the guy who bought his wife a Peloton for Christmas had everyone in a lather? (That was prepandemic, of course. Now it seems positively quaint that anyone gave it a moment’s thought.) Or perhaps it’s a company that you’re a customer of, or one that competes in the same space as the firm you work for. It’s only natural to be interested in those instances.

For the most part, however, I put the whole gamut of individual corporations’ activities –whether new CEOs, product launches, mergers, earnings misses, you name it – into my "too hard/don’t bother" pile. In large part, this decision relates to my "too hard" pile for investments. I’m mostly out of the business of picking individual stocks, favoring low-cost broadly diversified funds instead. That makes corporate news largely irrelevant to my investment management. I think I can add much more value with tax planning, asset allocation, and good old saving instead. Putting corporate news in my "too hard/don’t bother" pile enables me to focus squarely on those matters rather than being distracted by ephemera that don’t matter in the long run.