Managing the Unmanageable
“We need to unlearn what we think we already know.” –Jonathan Clements
The truth of the matter is that we humans are not wired for investment success. Our brains are hard wired for short-term survival needs. Unfortunately, these short-term needs usually run contrary to what it takes to be a successful long-term investor.
Our human biases convince us that we know what the future will bring. Check out Clements’ recent blog where he makes the case that we have to unlearn some conventional wisdom if we want to have a successful investment experience. Playing Dumb
What we’re talking about here is managing the unmanageable – human behavior. I agree with Clements. We should focus on the facets of investing that we can control such as our asset allocation and the amount of risk we take, investment costs and minimizing the taxes we pay.
This area of behavioral science is fascinating and is gaining a lot of serious thought in the investment industry.