The Law of Triviality

I recently came across a fascinating behavior pattern highlighted in Morgan Housel’s The Art of Spending Money (quite an engaging book). It’s called Parkinson’s Law of Triviality, coined by historian Cyril Northcote Parkinson.

The law states: “The amount of attention a problem gets is the inverse of its importance.” Parkinson illustrated this with a fictional committee that approves a $10 million nuclear reactor in the blink of an eye but spends hours debating a $20 budget for employee refreshments. The reason being, everyone understands snacks, but almost no one understands nuclear reactors.

The psychology behind this reasons that focusing on small problems makes us feel in control, and responsible. We often assume that someone who masters tiny details must be equally competent with big decisions. In reality, that is rarely the case.

While this applies to lifestyle choices too, I want to focus on investment decisions. We often suffer from “decision paralysis” by over-analyzing the trivial while neglecting the vital ones. Using Daniel Kahneman’s concept of Slow Thinking (reference), let’s break down which investment choices deserve your time and which you should ignore.

The Trivials (Where to Stop Wasting Energy)

Frequent Portfolio Checking

If you spend 90% of your time observing data and only 10% acting on it, you are overdoing it. An active investor needs to monitor their holdings, but a few dedicated block of times a day is far more effective than keeping dual monitors glued to floating charts all day!

Chasing Micro-Trends

Even if you stay away from day trading, there’s a tendency to zoom in and analyse daily technical trends. Which makes absolutely no sense. Nowadays a lot of price movements are news driven due to abundance of channels. The guidance is not a blanket NO towards technical indicators, but a more reasonable weekly or monthly chart analysis prevents hyper activity.

Obsessing Over Limit Orders

I used to set limit orders just a few delta away from the current price and watch the screen until the trade filled. Unless you are trading massive volumes or dealing with extreme volatility in price, this barely moves the needle. The hidden cost is the “fear of missing out” that forces you to constantly modify your order. If you believe in the stock, just hit the market price and move on.

Over-Optimizing SIP Dates

Fretting over which day of the month to set your Systematic Investment Plan (SIP) offers the lowest ROI on your time. I recently experimented with some mid-cap mutual fund data, comparing SIPs made on the month’s minimum NAV versus the maximum NAV.

As you can observe, the difference in XIRR was negligible, not very surprising for a long term horizon. Whether you invest on the 1st, the 15th, or the 25th, the long-term impact is minimal. The discipline of investing matters, not the date.

Yet another data pulled from similar experiment done on a Small cap fund.

Investing on Dips Without a Strategy

Every dip looks like an opportunity, but without a threshold strategy (like say, buy only at X% dip, or sell at Y% upside), it’s mentally draining. It’s a looping decision making activity.

Instead, build some strategy of your own that requires less babysitting. As an example, I back-tested an “Alpha Top-up SIP” strategy for a Nifty 50 Index fund –

• The Rule: Invest your standard SIP on the 1st.
• The Trigger: If the NAV dips more than 5% from the current month’s high, invest an additional top-up.

The data showed a return of 13.71% XIRR on this strategy versus 13.44% for a standard SIP. While the percentage gain seems small, the absolute wealth generated was significantly higher because you deployed more capital during lucrative windows. This is a “set it and forget it” way to capture alpha without daily stress.

Non-Trivials (Where to Invest Your “Slow Thinking”)

Portfolio Allocation & Rebalancing

The first thing when a disruption happens is test the investor’s psychology to disrupt their allocation. Sticking to a long-term vision amidst the noise is the hardest part of investing. Reviewing your allocation and global macro trends twice a year is a high-value use of your time.

Sector rotation is a subset of strategy which does not meet everyone’s attention since majority are fixated on individual stocks. A lot of momentum trades and swings happen across the breadth of sector, so this in particular is a good investment to study.

Understanding Tax Implications

If you don’t understand taxation, you are only half an investor. From Capital Gains revisions over years to strategies like Tax Loss Harvesting, staying updated can save you more money than you could imagine. In India, for instance, “Wash Sales” (selling and immediately repurchasing) are legal and can be a powerful tool. Opportunities like Tax Loss Harvesting not just offset the liabilities, but it also serves indirectly as an opportunity to rebalance your portfolio.

Crafting a Real Exit Strategy

Long term investing does not mean hold for ever. Entering a stock is relatively easy; exiting is where the pros are made. As I’ve discussed in one of my previous posts here, having a strategy, even a non-optimal on, is better than shooting in the dark. It gives you a baseline to iterate, backtest, and improve.

The Math of Cash Flow

You invest to eventually take home money, not to stare at notional profits lingering around for ever! Whether you are planning for F.I.R.E. (Financial Independence, Retire Early) or general wealth, you must have a structured plan for how your portfolio will eventually generate liquid cash flow. This is quite a stretched topic, but I have covered some structured approach around it here in context of F.I.R.E planning. Just like any company’s balance sheet, consider cash flow as a stable health metric for your personal finance.

Placing Big Bets (The Pareto Principle)

To quote Warren Buffett: you only need to be right a few times to be successful. Real wealth is made in concentrated pockets where you have high conviction. Use your “Slow Thinking” to identify these 20% of opportunities that will drive 80% of your returns. Check out my earlier extensive blog around how Pareto Principle works in investment world. Research deeply, and when you find a winner, don’t be afraid to double down.

There is no such thing as a “24/7 investor.” Productivity in the markets isn’t about how many hours you log; it’s about the quality of the decisions you make. Choose your actions wisely, ignore (or at best, automate) the trivial ones, and free up space for the moments that happen outside of the markets!