On Vacation with my wife this week. A real vacation, not a trip (no kids!!!). It is for our 6 year Anniversary and we are headed to South Haven, Michigan for a few days!
I will be back next week with some new content on something that’s been bothering me recently when I think about our knowledge about money and our behavior. More specifically how our knowledge and behavior do not align. We can have all of the information in the world and we still go put that $100 pair of shoes on a credit card. Or choose to go on vacation with money we don’t really have. Or buy that thing because it’s 40% off when we really don’t need it or have the money for it. This is a universal problem. I struggle with it. I’m sure you struggle with it. So what do we do about it?
More on all of that next week but this week I want to link to an article Carl Richards wrote in the New York Times about this very topic and how creating some space between the stimulus and response can help us curb impulse buying and drastically help our bottom line.
Carl is Awesome! Hope you enjoy!
Why You Need Some Space Between Thinking and Doing
In Part 1 we talked about the power of changing our mindset when it comes to a market downturn and how that can dramatically affect our behavior. This mindset shift is truly a GAME CHANGER! It is the reason I am able to maintain calm and do absolutely nothing or even buy when the market goes down.
Now I want to give you a couple of strategies that have helped me and can hopefully help you make the wise decision in the heat of the battle.
These strategies are:
- Arm Yourself with the Truth
- Stop Paying Attention
Investing is not complicated! At least it doesn’t have to be. So, why then, did the average investor return 3.7% over the last 30 years while the market returned 11.1%? The answer to this question is two-fold: investor behavior and cost. We have talked about cost, how it can destroy your returns, and how you can avoid it. Today we will deal with something that can have an even larger drag on your portfolio if you do not manage it. It is a natural emotion but if we harness it properly we can use it to our benefit. We just need the proper mindset to do so. This emotion is Fear!
Fear is inevitable. It is normal. It is natural. And how you handle it will be the determining factor in retiring comfortably or potentially not retiring at all.
Fear can cause us to do crazy stuff! When talking about the outrageous under-performance over the past 30 years Jason Zweig of the Wall Street Journal says,