Posted on March 1, 2023 by Jay Mooreland - Uncategorized
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.
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.
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. 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 less mistakes and more decisions that are in line with your stated goals and objectives.
©2023 The Behavioral Finance Network. Used with permission.
Posted on February 1, 2023 by Jay Mooreland - Uncategorized
As New Year’s Day is now in the rearview mirror, we can surmise that people are struggling to keep their resolutions. Indeed some may have already given up, perhaps with a determination that next year will be the year. A long-term study by the University of Scranton found that less than 10% of resolutions become part of our lives.1
Such a high failure rate at resolutions of our own making should give us pause. Why are we so bad at keeping resolutions? Research shows that it may come down to two primary things: how we frame our resolution2 and taking too big of a leap – too big of a behavior change at once.
Framing Your Resolution for Success
Framing the resolution comes down to our actions. Many resolutions are to stop a bad habit. Stop smoking, stop eating sweets, stop using social media. Those are incredibly difficult to stop because of triggers (conscious and unconscious) that provoke a response. It is more productive to create a new habit in its place, so there is a response, just not the bad habit. For example, instead of smoking, perhaps you chew gum. Instead of looking at social media, you pick up a book. You select a positive habit to replace the bad habit.
Creating Habits That Stick
Resolutions can be aspirational, but we should be realistic and recognize we may need to create small habits that inch us in the direction of our resolution. To improve the likelihood of sticking with new habits, we should form ones that are not major deviations from our current lifestyle. Making a 1% change may not be noticeable or something to brag about, but they can be far more meaningful in the long run.
Once we master a new habit, we create another small habit that gets us one step closer to our resolution. This becomes a continues cycle of improvement that empowers and helps us become the person we want. A marathon is completed with many small steps, not a few giant leaps. We should view our personal resolutions in a similar manner.
Today is the Best Day to Start
No matter what, today is the best day to start a habit that will improve your life. Why today? Because it isn’t tomorrow. When we are forming small habits, we don’t face uncomfortable or unnatural changes to our lifestyle. Hence, there is no reason to procrastinate the day of achieving our resolutions.
1. Just 8% of People Achieve Their New Year’s Resolutions. Here’s How They Did It, Forbes, Jan 1, 2013.
©2023 The Behavioral Finance Network
2. The Science Behind New Year’s Resolutions That Actually Stick, WSJ, Jan 27, 2023.
Posted on November 1, 2022 by Jay Mooreland - Uncategorized
Tis the season of gratitude. Thanksgiving is perhaps one of the most underappreciated holidays, but most needed. Given the difficult markets we have endured this year, being thankful may not come so easy. It may be necessary to practice intentional gratitude.
There are so many things beyond our individual control – the vitriol in the media, strong political opinions, and the financial markets to name a few. These will continue with us, and if we aren’t careful could consume our thoughts, feelings, and our personal degree of contentment.
One way to create happiness, despite whatever circumstances we are in, is to practice gratitude. We may not be able to control our circumstances, but we control whether we choose to be grateful. We should be thankful for much; in fact, we probably don’t spend enough time counting our blessings. And that is life. While we do our best to be thankful, it is often short-lived.
Choosing to See the Good
With every decision, every life event, it is our choice to see the good in it. Even bad outcomes and decisions can be significant positives if we learn from them and become a better person. But we must choose that.
There are people who are thankful for the smallest things – you probably know a few. They are like magnets. We want to be around them because they exude love and joy. And then there those who are impossible to please, those we can’t wait to get away from. Who do you want to be this holiday season? Like it or not, we tend to take on traits of those we surround ourselves with. Want to be more grateful? Spend more time with people who practice gratitude regularly.
I am grateful for you. Thank you for your trust and confidence in me. Thank you for the privilege to know and work with you. Thank you for taking my advice, even when it goes against what may feel right. Thank you for being a patient investor, I know it’s not always easy, especially this year. And thank you for choosing me as your partner on this journey.
©2022 The Behavioral Finance Network
Posted on September 1, 2022 by Jay Mooreland - Uncategorized
A favorite (and costly) pastime of investors is to invest in assets that have recently done well. This happens in good times as investors seek better returns, and they happen in bad times as low-yielding investments such as cash are more attractive than money-losing stocks. In other words, investors chase returns.
By investing in what just did well, investors are systematically buying after they witness gains elsewhere and selling after their assets experience loss. Chasing returns can feel very good at the time but comes with a real financial cost. Dalbar, Inc. estimates that equity investors underperformed the S&P 500 by roughly 6% per year over the last 20 years1.
Why We Chase Returns
There are two primary reasons it feels right to buy after we witness gains and sell after experiencing losses:
- We are greatly influenced by what just happened. Whenever we try to project the future, our brains are significantly influenced by what just happened. Things were just good implies that things will be good going forward, and vice versa.
- This is exacerbated by the narrative of the day. Our brains love a good story. We seek information to understand. When the market goes up, the narrative is often positive, leading us to feel good about the future. When the market goes down, the narrative is almost always negative, reinforcing a negative outlook.
Normal, But Not Beneficial
It is completely normal to invest in things we expect to go up and avoid assets we expect will go down. In fact, any rational person would do that as part of their investment strategy. But the problem is that markets move quickly and often surprisingly. Narratives are wonderful and can be quite accurate in hindsight. They can even increase our confidence in a certain viewpoint, but narratives offer no predictive ability in future outcomes.
This is why I advise you to remain disciplined to your plan and stay the course. I recognize this is not easy; temptations abound that are pleasing to our mind and feelings. But that is why you have me. Together, we can be aware of common investment pitfalls and ensure that all investment decisions are well-thought and in line with your stated objectives.
©2022 The Behavioral Finance Network. Used with permission.
1. JP Morgan Guide to the Markets, July 2022.