Dieting and Investing

We want to be rich and we want to be thin, so it’s not surprising that two of the world’s most successful industries are those that cater to those two aspirations.

But take a closer look and you’ll find that the diet and investment industries have far more in common than you might have thought.

Both have scant regard for the evidence

The overwhelming evidence is that the best way to lose weight is to eat healthily, consume fewer calories and exercise more; and that the optimal investment strategy is to buy and hold a low-cost and highly diversified portfolio. The evidence has been known for decades. That the diet and investment industries remain so powerful is testament to their ability to hide it, or distract us from it with spurious evidence of their own.

Both prey on people’s gullibility

Of course people want to believe there’s a pill that will help them shed the pounds, or that a daily cup of herbal tea will magically allow them to enjoy their favourite foods and still drop a dress size. Gullibility is a common human frailty that pushers of diet and investment fads use to their advantage.

Both focus on the short term

Another human weakness on which sales and marketing teams capitalise is our impatience. They know we want quick results, so they make us think we can lose that tummy in days. They give examples of people who really did make an overnight killing on penny stocks. But it takes time to become obese, and time to return to a healthy weight. Building wealth takes far, far longer still.

Both advertise prodigiously

Both the diet and investment industries spend heavily on advertising.  They also know just where and when to advertise and precisely which buttons to press. Crucially, they’ve mastered the art of appearing to offer more than they really do, while ensuring that any claims they make fall just within the relevant regulations.

Most of their products don’t work

Again and again we hear of new diet products, yet almost invariably they fail to deliver. Investment products are no different. The whole point of buying an actively managed fund, for example, is to achieve market-beating returns, but the evidence shows that, net of costs, the majority of active funds extract value from the investment process rather than add it.

Both are awesomely profitable

Finally, we’re back where we’re started, with perhaps the most glaring similarity between these two industries — namely their size and profitability. That’s right. Despite their manifest failings we continue to reward them royally with our custom.

The fact is that we can achieve the results we’re looking for. There are simple solutions to losing weight and to ensuring that each of us has enough money to last us until the end of our lives.

Note I said simple, not easy. Both require patience, single-mindedness and self-discipline. But both solutions will work as long as you stick to the plan — and you’ll save yourself a fortune in the process.

FFP calls its approach to investing as The Art and Science of Investing. Patience and Discipline is needed to avoid the mistakes that others make.