I was recently at a talk where a baby started making loud noises. Cute noises, but loud ones.
The presenter was about to make a point that could change the lives of his audience, but he chose to deal with his competition by subtly encouraging the parents to remove the infant interlocutor.
After what seemed an uncomfortably long time, the parents left with the child. But by then the presenter was off his game.
This represents an interesting metaphor for what's going on in the world today. The sounds of the baby represent all the distractions that we face as we try to move forward in our financial lives -- even though we'd probably be far better off ignoring them. The grunts of the infant are our politicians disparaging each other; gurgles are the leaders of Europe in their race for the salvation of the euro; and the coos are the corporate earnings reports that are better than most of us expected.
We focus on those noises even though we have no sure way to interpret them.
Nobel laureate Daniel Kahneman writes in "Thinking Fast and Slow," one of the best books on behavioral finance that I have ever read: "Nothing in life is as important as you think it is when you are thinking about it."
We spend an inordinate amount of time paying attention to things over which we have little control and that have virtually no long-term impact on us. Or worse, we become obsessed with things that we can't change and try to change them anyway.
I was talking to someone who got out of the stock market at the very bottom in March of 2009 because he paid attention to the pundits crying about the collapse of the U.S. economy and the inevitability of another depression. Since the stock market has almost doubled from there, his decision dramatically changed his long-term options.
You can't ignore the baby, but you also need to be careful to not focus on it. Making sweeping decisions to either completely get out of stocks or to throw caution to the wind and invest more than you need to are equally poor choices. They are reactions, not strategies.
If you spend too much time living in what might happen, you lose your footing in what is happening. Determine the range of your portfolio to be held in stocks -- for example, 60 percent to 80 percent -- and adjust within those ranges rather than making high-risk, all-in or all-out market calls.
Kahneman says that "Errors of prediction are inevitable because the world is unpredictable. High subjective confidence is not to be trusted as an indicator of accuracy."
In other words, those who are most strident in their predictions are also most likely to be wrong. Yet the screaming baby is far more difficult to ignore than the quiet one.
Perhaps the most important voice to ignore is the notorious "No!" You know, the one babies scream once they've learned the word. Those "No's'' are the things that prevent us from living.
I attended several funerals last year and the most touching were the stories that people would share about the person who passed away. Those stories were about the ''yeses'' in their lives -- their passions, their interactions. We keep these memories in the lock boxes of our being and don't pull them out often enough to reflect upon them.
What if in 2012 you said yes to something that you wanted to do but had been afraid to do? Are there things that you have been putting off because you hear old wailings distracting you from creating new stories and new memories? Spend your life wisely.