We live in a world where kids get 7th place trophies. It’s embarrassing.
As my friend Phil Pearlman said in one of our recent podcast episodes, “If my kid ever gets one of those, I’ll make him throw it away”.
What’s wrong with taking the loss, learning to live with it, and then moving on?
In October, Dr. Brett Steenbarger shared some of his thoughts with us on visualizing yourself taking the loss, before even entering into an investment. Already going through that “pain” in your head makes the loss easier to accept in the future if/when we are wrong.
Last month I put out a post called, The Market Owes you Nothing, so we remember that indeed, the market does not owe us a single thing. Financial Advisors put that compound interest chart in front of investors like a carrot, and then investors get upset when the market is not going up. The better chart is the one showing the massive draw downs in stocks over the past century. We see 10% and 20% corrections all the time and sometimes even 50%. That’s the chart that needs to be dangled in front investors like a stick, rather than a carrot. But that one doesn’t help raise assets 😉
In Dr. Daniel Crosby’s new book, The Behavioral Investor, he brings up the topic of loss aversion in both markets and life. This weekend, he said this is his favorite paragraph in the book: [Read more…]
