How To Avoid “Awww, To Hell With It” Investing Syndrome

Usually, when a hear from a reader who wants to avoid letting material success get to his read, I recommend that he start regularly reading C.S. Lewis. It is hard to be a prick when you read lines like “prosperity knits a man to the world—He feels that he is finding his place in it, while really it is finding its place in him!” as part of your morning routine.

When it comes to wealth destruction, I initially assumed that losing money would be a soft, gradual thing where you see $800,000 turn into $750,000 and then $700,000, and on and on. You could say I had a C.S. Lewis mindset when it comes to money loss: “Indeed, the safest road to Hell is the gradual one—the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts.”

Based on what I have heard anecdotally, though, the investors among you that are in rebuilding mode came to it quickly in a year or less—a divorce in 2009 while a stock portfolio was tanking, a lot of money in Wachovia at the wrong time, or unloading a stock portfolio in response to fear of lowering stock prices at the end of 2008. The problem, though, is that these unfortunate circumstances are often compounded by worse decisions after the fact; when you see $800,000 turn into $450,000 in a hurry, it can be easy to lose the motivation to save $1,200 per month and just “awww, to hell with it” and give up.

You can avoid these outcomes by making one important change in your behavior: create a self-imposed rule that you will wait a certain amount of time before making any important decision that affects your financial. Say something to the effect of, “No matter what, I won’t make a decision that involves more than $3,000 unless I think about it for at least three days in a row.” Heck, that’s my rule with negative e-mails (I don’t respond until at least 72 hours after receiving it, if at all) and it’s an automatic way to be professional because it’s easy to get ticked off at something that is happening in the present moment, but it seems like a weird use of energy to get mad at what some random person on the internet sent me three days ago.

It’s not just the building wealth side of the ledger that matters; it’s the management and containment of mistakes that can improve your life just as much.

The other way to manage financial mistakes, in addition to having a self-imposed cooling off or deliberation period, is to remember that additional money can always be made. If you ever find yourself in the situation where losing money from a stock is the worst thing going on in your life, consider yourself extremely blessed and know that there are 6.8 billion people out there who would gladly trade for your shoes. Death of people you love and the destruction of personal relationships you value is where you should focus your grief—making money can be treated as a fun puzzle to solve. You’re only a few thousand dollars set aside into Visa stock (that’s allowed to compound for a bit) away from getting ahead of where you were beforehand, anyway.





Originally posted 2014-08-08 08:00:58.

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One thought on “How To Avoid “Awww, To Hell With It” Investing Syndrome

  1. As your man Charlie Munger quoted in his Psychology of Human Misjudgment paper,“You can always tell the man off tomorrow, if it is such a good idea.” The knee jerk reaction can cause a lot more damage in the long run. I think your 3 day waiting period is an excellent rule of thumb. With point-and-click technology today it’s very easy to make decisions that end up looking bad in the rear view mirror.

    Another great article. I’m slowly working my way through your archives and I’m consistently impressed.

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