There are a lot of investing myths and lazy assumptions out there that many believe to be true that upon closer inspection just aren’t so.
You have probably heard “When you have a double, sell half and now you are playing for free with house money”, “It is never a bad idea to take profits”, “You have no loss or gain until you sell”.
These are dangerous ideas and I would like to expose them in short videos for what they truly are: liars and threats to our long-term financial health.
The theme will be “Fighting Fuzzy Thinking” and there are many others than those three mentioned above.
These little monsters are designed by our minds to comfort our ego from stark reality but we are warriors and truth is our arena, right? And so we cannot allow these imposters to roam free in our minds because they are not our friends. Sure they may seem innocent but they are far from it because they can creep in inconspicuously and pollute our investing process which is our main weapon in our struggle for our long-term financial goals. Investing is about small edges and if we want to outperform the general market over time (and justify our existence in it) then we cannot afford to have glaring errors in our mode of thinking, however small they may appear on the surface.
In poker we used the term “plugging leaks” when trying to locate unknown errors in our thinking process and I think that idea can be applied to investing as well. Errors in our operating system compound over time so we must be on our guard and weed them out one by one like a dispassionate detective on the hunt for facts and truths.
And let me be clear about one thing. Some of us are fuzzy thinkers by nature. I personally am at a disadvantage in that respect as I score low on “sensing” in the Briggs Myers personality test on how we gather information (order, step by step approaches) and high on “intuition” (chaotic pattern recognition). But I don’t think we need to be endowed with the clarity and logical mind of an engineer in order to weed out inconsistencies and errors in our thinking. It would probably help if you have a mind like that but if you don’t there are ways to overcome it if you possess intellectual curiosity and a strong will to overcome your in-built weaknesses. A strong desire for your wallet to be thanking you into old age is also good ally to have.
The title of this post is from a book I read before I turned poker pro back in 2005. It is by then poker authority David Sklansky and the book is called “Fighting Fuzzy Thinking in Poker, Gaming & Life”. He used to love to challenge the reader to spot errors through sneaky questions and in that same spirit I will pose a question to you when I post my first short video on the subject tomorrow.
The title will be “Fighting Fuzzy Thinking #1. Why Selling Half When You Have a Double is Wrong”.