Recently, Ryan Vlastelica penned a column suggesting investors should simply be “apathetic” when it comes to their money.

“Apathy doesn’t sound like a sensible investment philosophy, but it may be one of the most successful approaches a person can employ to grow wealth.”

Listen. I get it.

You can’t beat the market, so just “buy and hold.”

Over a long enough period, I agree, you will make money.

But, simply making money is not the point of investing.

We invest to ensure our current “hard earned savings” adjust over time to provide the same purchasing power parity in the future. If we “lose” capital along the way, we extend the time horizon required to reach our goals.

Crashes Matter A Lot

Ryan makes his case for “apathy” by quoting Barry Ritholtz who stated:

“If you don’t want to invest in equities because you fear a market crash, then you should never be in equities, because equities always crash.”

While Barry is absolutely correct in his statement, investing is never an “all or none” proposition. Being an investor is about understanding the “risk to reward” relationship of placing capital into the financial markets.

There is no “great investor” in history, not even Warren Buffett, who is apathetic about investing. It is also why every great investor has one simple rule in common:

“Buy low, Sell high.” 

Why? Because it is the ONLY manner in which you truly create wealth.  As Ryan notes:

“Ritholtz stressed that investors should diversify, in part to mitigate their concerns about portfolio volatility, but added that the best buying opportunities were when things looked the worst.”

The problem with being “apathetic” should be obvious. If you never sold high, then where will the capital come from to “buy low?”

Think about your personal situation.

Yes, that’s the problem with “buy and hold” and “dollar cost averaging” which will become much more apparent momentarily.

Crashes matter and they matter a lot.

Let’s set up a quick example to prove the point.

Bob is 35-years old, earns $75,000 a year, saves 10% of his gross salary each year and wants to have the same income in retirement that he currently has today. In our forecast, we will assume the market returns 7% each year and we will use 2.1% for inflation (long-term median) for planning purposes.