When Less Can Give You More
Posted February 28, 2023
Posted February 28, 2023
We are generally in pursuit of more. More income, more recognition, more opportunities, more happiness, etc.… Because “more” often results in desirable outcomes, it is natural to think about what we can get or do more of rather than what we can do less of. But when it comes to investing, focusing on what we do less can yield us more returns.
When it comes to investing, it isn’t about becoming more intelligent. It is about making fewer mistakes. It is about evaluating the performance of our holdings less often. It is less listening to the noise of forecasts and the financial media. It is becoming less impatient and less interested in the returns of others.
Fear of loss and fear of missing out are powerful emotions that can influence the best of us to make unwise decisions. Feelings are automatic and inherent in most of us, and we are hardwired to respond to those feelings. The less “tuning in” we do as investors, the less likely we will be influenced to make hasty decisions.
Every investor, even the very best of them, makes mistakes. What separates the best investors from everyone else is that they have learned to make fewer mistakes. It’s not that they were born making fewer mistakes; it’s that they have chosen to recognize and learn from prior mistakes. Ignoring our mistakes or blaming another (i.e., the stock market) is more natural. But if we don’t admit and learn from our mistakes, we will make more of them, not less of them.
We are hardwired to rely subconsciously on mental shortcuts and emotions when making decisions. This inevitably leads to mistakes. We can lessen our mistakes by creating a decision framework, a process. Setting up proper defenses and procedures can help us respond less emotionally and more purposefully to market and economic occurrences. And that is why you have me! I am here to help you make fewer mistakes and more decisions that align with your stated goals and objectives.
©The Behavioral Finance Network
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