Change. We spend much of our time thinking about, predicting, and anticipating it.
Markets change. Headlines change. Technology changes. Policies change. Every year brings a new reason to say “this time is different.”
Several years ago, Jeff Bezos reframed the question of change. He said it is more important to consider what will not change. In other words, what are the fundamental truths we can rely on?
What Won’t Change
Human nature.
The market, economy, players, and environment may change, but how we behave as a group rarely does. Our preferences are fairly static, and our emotional wiring hasn’t changed much, even as the world moves faster.
We Are Hardwired to Be Bad Investors
That is a fundamental truth. As humans, we are emotional. We respond hastily when threatened, overreact to uncertainty, prefer shiny things to the mundane, and hate not knowing. Markets give us plenty of chances to prove it.
Long-term investing is meant to be boring, but our brains crave excitement. Most news is seductive noise to the long-term investor and a costly distraction.
Bezos said, “When you know something is true, even over the long term, you can afford to put a lot of energy into it.”
Using Your Energy Wisely
Most investors spend their time and energy speculating about market outcomes and public policy, which are unpredictable and constantly changing.
It would be more productive to spend our time and energy on what doesn’t change, such as human nature. The goal is not to predict tomorrow but to respond more effectively to whatever occurs.
That’s where planning, collaboration, and trusted advice play their most crucial role.
Stay relentless,
Scott
©The Behavioral Finance Network