Huh? What? Short Attention-Span Investors
Summary Eight seconds. That’s all we, as human beings, use to focus on any one particular thing before being distracted or allowing our minds to wander. The implications of having such a short attention span are immense. The frequency of short-term gains and focus on the here and now prevents many from taking a longer-term view which can help mitigate risks. “The Internet is a big distraction.” – Ray Bradbury Every day I like to do what millions of people around the world do: read up on news. Not too long ago, you’d see open newspapers from crowds of subway-passengers looking for ways to make the commute more tolerable. Now? Seemingly everyone turns on their smartphone, or tablet to absorb the news of the moment. We feel smarter, we feel more educated “knowing” what’s going on in the world around us. One particular story hit me a few months ago on a normal day commuting to work, which I took an excerpt from below: “Humans have become so obsessed with portable devices and overwhelmed by content that we now have attention spans shorter than that of the previously jokingly juxtaposed goldfish. Microsoft surveyed 2,000 people and used electroencephalograms (EEGs) to monitor the brain activity of another 112 in the study, which sought to determine the impact that pocket-sized devices and the increased availability of digital media and information have had on our daily lives. Among the good news in the 54-page report is that our ability to multi-task has drastically improved in the information age, but unfortunately attention spans have fallen. In 2000 the average attention span was 12 seconds, but this has now fallen to just eight. The goldfish is believed to be able to maintain a solid nine.” Source: The Independent Eight seconds. That’s all we, as human beings, use to focus on any one particular thing before being distracted or allowing our minds to wander. We went from 12 seconds (already hilariously low), to an even shorter 8 seconds just a little over a decade later. I shudder to think how short that attention span will get in the next decade, and the next, and the next. We live in a world where there is so much noise, so much distraction, that we simply can’t focus anymore. Investors have mentalities of traders, and traders act like high-frequency algorithms which base decisions on information which is largely impossible to process without advanced computing power. The implications of having such a short attention span are immense, as it results in a complete inability to focus on the long-term, and think beyond the talking point of the moment. People like to watch the behavior of certain exchange traded funds like the S&P 500 SPDRs ETF (NYSEARCA: SPY ), and the iShares Russell 2000 Index Fund ETF (NYSEARCA: IWM ) because that intraday movement feeds our short-term, unfocused addiction to data. Too bad it doesn’t actually help. Short focus also makes discipline harder and harder to have consistently. One of the reasons we purposely designed our alternative Morningstar 4 Star overall rated ATAC Inflation Rotation Fund (MUTF: ATACX ) (rating as of 9/30/15 among 234 Tactical Allocation Funds derived from a weighted average of the fund’s 3-year risk-adjusted return measures) to be quantitative in nature is to force unemotional discipline into tactical risk management. All of the knowledge in the world doesn’t matter if we qualitatively get distracted and can barely focus for more than 8 seconds on any one topic, let alone plan out an asset allocation policy or rotational strategy based on opinion as opposed to math. Focus tends to be what differentiates the great from the good. The temptations, however, are enormous in an instant gratification world where we want to make money every single second, because we can only focus on a few of those seconds before deciding (with conviction) whether something is working or isn’t. To be better at long-term wealth generation, I believe we need to focus first and foremost on what longer-term quantitative analysis suggests matters most. As stated in the summary versions of our award winning papers (click here to download), the major focus for investors and traders shouldn’t be chasing upside, but minimizing downside. The problem? The frequency of short-term gains and focus on the here and now prevents many from taking a longer-term view which can help mitigate risks. What do you do about it? Turn your screens off, shut down your phones, and focus on only those things that have tended to have predictive power. Too much information is a massive distraction, and detrimental to focusing on real wealth generation techniques as opposed to the trade of the moment. Now, where’s that newspaper? Opinions expressed are those of the author and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. The Fund’s investment objectives, risks, charges, expenses and other information are described in the statutory or summary prospectus, which must be read and considered carefully before investing. You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting atacfund.com . Please read the Prospectuses carefully before you invest. 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