We are generally in the pursuit of more. More income, more recognition, more opportunities, more happiness etc... Because “more” often results in desirable outcomes, it is natural to think in terms of 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 return.
The Power of Doing Less
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 are to be influenced to make hasty decisions.
Mistakes Happen
Every investor, even the very best of them, make mistakes. What separates the best investors from everyone else is that they have learned to make less mistakes. It’s not that they were born making fewer mistakes, it’s that they have chosen to recognize and learn from prior mistakes. It is more natural to ignore our mistakes or blame another (i.e. the stock market). But if we don’t admit and learn from our mistakes, we are bound to make more of them, not less of them.
Lessening Mistakes
We are hardwired to subconsciously rely 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. For example, rebalancing your portfolio quarterly is a process that strips emotions and decision making out of investing. It also sells highly appreciated assets and purchases undervalued assets. We do this for you on a quarterly basis. Setting up proper procedures can help us respond less emotionally and more purposefully to market and economic occurrences. And that is one of the reasons you work with us. We are here to help you make less mistakes and more decisions that are in line with your stated goals and objectives.
©The Behavioral Finance Network
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