Put space between the desire to act and action.
You make better decisions when you have a chance to slow down (that applies to investing and life).
Dr. Richard Smith
January 30th, 2023
Blog | Put space between the desire to act and action.
tl;dr
Most investing apps—and the media—force you to make decisions way too fast.
Putting space between the impulse to act and action improves your decision-making.
Here's a message from Carl Richards that really resonated with me:
"When the markets get scary, the single most important thing to do is create space between the desire to act and the action. That space will give us an opportunity to reconnect to why we were investing in the first place."
This is brilliant—no surprise, since Carl Richards is a guy I really respect when it comes to decision-making and money.
And honestly, I think that could be a manifesto for Finiac.
“Create space between the desire to act and the action.” The reason this one message is so important is because there's whole industry—the retail finance industry—designed to eliminate the space between act and action.
Think about it: we've got these mobile devices, we've got these brokerage accounts. Trades are free. You can pull out your phone any time and get reckless. You get push notifications all day long.
All of that is intentionally designed to reduce and eliminate the distance between act and action.
I think if people were smart, they'd be paying for a service that would help them to increase the distance between act and action.
If we built a service that ultimately just implemented Carl Richards insights, I think we'd do the world a heck of a service. Finiac is that service.
How to slow down in investing
This is the reason that, in Finiac, we always focus at the portfolio level.
Sounds disconnected, right? But fundamentally, when you shift focus to a collection of asset instead of laser-targeting one asset at a time, it really forces you to slow down.
When you're trying to make a "buy" decision, it should always relate to the how this thing you want to buy will fit in with the rest of your assets. I've written extensively elsewhere about correlation and position-sizing and how to construct a portfolio, so take a deep dive if you like.
The point is that investing is not a series of a bunch of individual, disconnected decisions. Investing is about a strategy over a long term, building a portfolio of good, uncorrelated return streams.
So if you just think in terms of a portfolio and you say, "Okay, I've got some call to action in front of me. Someone is trying to get me to buy something. What would that mean for the rest of my portfolio?"
Right there, you're putting distance between act and action?
For every decision you're making in the markets, always consider it in the context of your overall strategy and your overall portfolio, to see if it makes sense. That's how to put distance between act and action.
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