Money is Like Soap: The More You Handle It, The Less You Have

The Trading Trap

There’s a kind of investor you see a lot in your late 50s. They’ve worked hard. They’ve saved well. And they’ve spent 20 years actively managing their investments — switching funds, following tips, moving in and out of the market, making what felt like smart, informed decisions.

And then they sit down to work out what they’ve actually got.

The number is… smaller than it should be. Not disastrously. But smaller. Given what they earned, given what they saved, given how long the markets have been running, smaller.

Where did it go?

The answer is almost always the same. It went in small, quiet pieces. Brokerage. Spreads. Capital gains tax. Funds switched at the wrong time. A managed fund with a 1.5% MER that nobody ever questioned. Selling in a panic and buying back in after the recovery. Over and over, for 20 years.

Money is like soap. The more you handle it, the less you have.

The Hidden Costs of Being ‘Active’

The financial industry loves active investors. Every trade is a revenue event for someone — the broker, the platform, the fund manager. The more you move your money around, the more everyone else benefits.

The costs seem small individually. That’s the trick. Here’s what actually adds up over time:

Brokerage and trading costs. Even discount brokers charge $10–$20 per trade. That sounds fine for a single transaction. But if you’re trading regularly — switching positions, rebalancing aggressively, chasing momentum — it adds up to thousands of dollars a year that your investments never get to compound.

Bid-ask spreads. Every time you buy or sell, you pay a spread — the difference between the price you buy at and the price you’d immediately get if you sold. For liquid large-cap stocks it’s small. For thinner markets, ETFs trading at a premium, or managed funds with wide spreads, it’s more significant. And you pay it every time.

Capital gains tax. This is the big one that catches people out. Every time you sell an investment that’s gone up in value, you potentially crystallise a capital gains tax event. CGT at your marginal rate on gains you haven’t spent — it’s a real cost, paid in real dollars, out of your real portfolio. If you’re trading in and out of positions regularly, you may be generating significant tax liabilities that compound your wealth erosion over time.

Timing mistakes. Research consistently shows that individual investors underperform the market they’re investing in — not because of bad investments, but because of bad timing. They buy after markets have run. They sell after markets have fallen. The decision to ‘do something’ almost always happens at the wrong moment, because that’s when the emotional pressure is highest.

Fund fees that compound in reverse. A managed fund charging 1.5% MER versus a passive equivalent at 0.2% costs you 1.3% per year. On $500,000, that’s $6,500 a year. Over 20 years, compounded, the difference in your final balance is staggering — often $200,000 or more. Active management rarely outperforms its benchmark enough to justify this, particularly over the long term.

The Psychology of Doing Something

Here’s what makes this problem so persistent: handling money feels like management. It feels like control. It feels like you’re being a responsible investor.

Checking your portfolio daily. Rebalancing when something moves. Switching funds when performance looks soft. Reading market commentary and adjusting your positions accordingly. This all feels like diligence.

But in practice, it’s the opposite of a good investment strategy. It’s activity dressed up as discipline.

The most successful long-term investors in the world — from Warren Buffett to the average index fund holder who quietly compounded their super for 30 years — share one characteristic. They resist the urge to do something. They stay in their lane. They let the investments do the work.

This is not passivity. It’s patience. And patience is one of the hardest things to sell, because it doesn’t feel like anything is happening.

The Cow Connection: You Don’t Trade Your Herd

This is where the 2 Cows Strategy becomes particularly clear.

A good dairy farmer doesn’t constantly buy and sell their herd. They don’t check the cattle market every morning and rearrange their paddocks based on what’s happening in beef prices. They don’t switch cow breeds because someone at the pub told them Friesians are overvalued.

They milk the cows. Consistently. Day in, day out. They collect the income, manage the herd’s health, and let the animals do what they were built to do.

The income-focused investment approach works the same way. You build a portfolio of quality income-producing assets — dividend shares, LICs, ETFs, fixed income — and then you let them produce. You collect the income. You reinvest it to buy more cows. You don’t rearrange the herd every quarter based on what the market is doing.

Every unnecessary trade is a cow you’ve partly sold. Every switching fee is milk you’ve poured down the drain. Every CGT event triggered by impatience is a cost that your portfolio never gets to compound from.

Buy and hold isn’t lazy. It’s the actual strategy.

What ‘Handling Less’ Looks Like in Practice

Reducing unnecessary handling doesn’t mean doing nothing forever. It means being deliberate about when and why you touch your portfolio.

Here’s what thoughtful, low-handling investing looks like:

• Choose quality once, and stay there. Spend more time on the original selection — dividend track record, balance sheet quality, income consistency — and less time monitoring once you’ve bought.
• Use automatic income reinvestment where possible. Let dividends buy more shares without a manual decision every time. This is cowpound interest in action — the income grows the herd automatically.
• Rebalance for structural reasons, not emotional ones. Review annually. Adjust when your allocation has drifted significantly from your target, not because the market moved last Tuesday.
• Think in decades, not quarters. Your super fund’s performance over one quarter is irrelevant to your 25-year retirement. Your income over 25 years is what matters.
• When something falls in value, your first question should be: is the income still intact? If your dividend-paying companies are still paying dividends, the paper fall in value is noise, not a reason to sell.

The Hardest Part

The hardest part of this approach is that it doesn’t feel like you’re doing enough. The financial media is designed to make you feel like you should be doing more. Every market movement is presented as an opportunity or a threat. Every volatility event generates commentary designed to make you anxious enough to act.

That anxiety — and the activity it produces — is the product being sold. Your calm, patient, low-handling approach is not.

But here’s the thing: the evidence is pretty clear on who ends up ahead. The investors who resist the urge to handle, who build quality income portfolios and let them run, who treat their investments like a well-managed dairy herd rather than a trading book — they’re the ones who arrive at retirement with more milk than they started with.

The soap is still in the dish. Intact.

Are You Handling Your Money Too Much?

If you’ve been active with your investments and you’re not sure whether it’s helping or costing you, the One Page Financial Plan is a good place to find out. We’ll look at what you have, what it’s producing, what it’s costing — and what a simpler, income-focused approach might look like for your situation.

Book Your One Page Financial Plan — $660 inc GST

adam@suncow.com.au  |  0418 785 200

No commissions. No suits. No BS.