Every Day is a New Investment Decision

“Every day is a new investment decision.”

Those words, spoken by a client, startled me with their simplicity.

On a basic level, I knew this to be true. Investing is far from basic, however.

“Every day is a new investment decision.”

The cognitive and behavioral biases that impact the typical investor often lead to a myriad of poor decisions. Even investors aware of these particular mental traps can – and do! – make the same mistakes. There are numerous behavioral economic biases that can trip up investors.

Mental Accounting.

Anchoring.

Recency Bias.

Endowment Bias.

Affinity Bias.

Sunk Cost Fallacy.

These biases – along with so many others – keep investors from making not only the right move, but any move at all.

Or, as the band Rush put it so succinctly, “If you choose not to decide, you still have made a choice.”

“Every day is a new investment decision.”

In the simplest form, that means looking at your investments with fresh eyes. For so many investors, the prevailing mindset is to justify their original investment thesis. Instead, try reframing your thought process by asking yourself, “If I didn’t own this investment, would I want to buy it today?”

Of course, the decision isn’t that simple. There are factors like taxes that come into play, but having the “Every day is a new investment decision” mindset can put you in the right frame of mind when it comes time to make a choice.

“Every day is a new investment decision.”

So, what investment decision will you make today?

Photo by Jens Lelie on Unsplash