How To Recognize And Avoid Pitfalls When Investing
41m | Feb 4, 2022"As much as people joke about it, saying investing is like gambling. It's not, but you can have very similar experiences with it."
"Any trader or investor should understand how they perceive losses or gains."
In today's episode of The Long Run Show, Michael and Austin talk about the psychology of investing and how to manage FOMO and impulsive trading.
Hosted By:
Transcript
Welcome back to the long run show. Austin Wilson. And I'm here with my co. Michael O'Connor and we are going to be talking today about the psychology of investing and we might broaden them a little bit more into the psychology of money as well.
There's definitely a lot of interesting biases and psychology. Problems and downfalls and pitfalls and a whole roller coaster of of things when it relates to how we think about investing, how we think about money, how we relate to it. So this topic kind of has coming up. We decided to talk about this because of the pullback we've seen in the markets recently.
Just, it was actually interesting timing wise, because I think it's been almost precisely a year since since GameStop. I think that was last week. Was the one year mark of the game stop mean stock craze. And then this January, instead of a crazy meme, stock rally, we're having a little bit of, a little bit of red on the ledger.
It's been been an interesting couple of months after all the run-up of 2021 nothing new here, but if we do start dipping down into a bear market territory, there's definitely some Ways, different ways that people react both positive and negative. So we're going to cover all of that today.
And I think this is an episode that we've done so many similar episodes. Like it's weird because we've talked about what this is the psychology of investing. We've talked about value, like all these things we've touched on. So many of these points that I feel like this is a great episode to dive deeper into that because it's something that.
I think any trader or investor should understand how they perceive losses or gains or knowing what they're going to do in the future. Understanding how you can be affected by that is so important. And we've just, we've touched on a lot of these topics. We haven't taken the time to dive deep and I think that's really helpful, like you said, at a time like this.
So I'm really excited same here. And actually I'm going to call you out. You have a little bit of like a, like an insider expertise, upfront, close knowledge of the crazy psychology. Of investing cause you did a lot of day trading back in the day, back in high school, I think, and a little bit in college.
And you were doing like crazy diametric trading. You got into some wonky stuff but you like definitely experienced that firsthand. And I've since through. Whether good or bad we'll call it neutral influence I've ventured into some more speculative kind of trades myself recently.
So I'm just like slowly dipping my pinky toe in the kind of speculative end of things. And it's interesting. But I've definitely experienced some of the. Oh the call I bought is up 134%. This is amazing. Then the next day is down 40%. I'm like, wait, what's going on here. So I've definitely experienced that before, but you were experiencing that like on a daily basis for a long while.
What were some of the kind I guess we'll go with like key downfalls you saw whether in yourself or in the traders that you were talking to and learning from it as well. That's a wild, I like that question because, and yeah, like you said I did a lot of trading When I was younger and to be honest, I burnt out of it.
Like nowadays I, I do research, moderate amount of research and then pick a stock to hold for anywhere between four months and three years. It was my horizon now. So I'm too busy and too tired too. My joints are too creaky to me. But that is it's. It's. There's an element that it's just, it's fun.
I enjoy playing blackjack at a good casino, as well as as much as people joke about, oh, like investing is gambling. It's it's not, but you can have very similar like experiences with it. And I think that ties exactly into the biggest downfall for myself. And what I've heard from other people is the problem is you can have gains and bigger gains.
But it's never going to be, unless you set it somehow you set, if the mental aptitude to set a goal, like I'm going to make this percentage a day or this amount of dollars a day or across months or in a strategy, you're always, it's so easy to go and make a ton of money and then, oh, okay. Shoot. I made all this money.
I gotta make more. And it's super, super easy to only. Appreciate a little bit when you have a big win, whereas whenever you have a small loss, it's a bad day. And if you have a huge catastrophic loss, you're really having a hard time and that's just baked into human psychology is the loss of version where people surveyed would rather get, sorry, would rather lose.
Wait a minute, they would lose like $50 than if it was a 50. Okay. That was a bad essentially the experiment where people would rather lose less money than they could gain. If it were. A chance. Yeah. Essentially my mind was all good. I mentioned diametric trading and you went back for that time.
You're like, oh my gosh. No. So yeah the loss of Virgin prior. So like you would rather lose 20 bucks than have the possibility of making like 50. Oh. Excuse me. No, this is great. This is great. So if you had, oh my gosh. Okay. So if you had a situation where someone gave you an option, say I'm going to flip up.
And you can play this game or not. If the coin lands heads, you win $50. If the coin lands tails, you have to give me $30 or something. There's some specific calculation. I don't know if the hand, but most of the time the people will choose to not play the game because of the risk of losing the risk of losing last month.
Even though it's technically a 50 50 shop for the same amount of money you should because you have, because there's a difference in the money. You should play that game a hundred percent of the time, according to game theory, but because of loss of version, People discount the value of future money and value and increase the perception of the value of losing.
Which is a very interesting thing, but it makes sense. It makes some ancestral, you got to worry about the tiger behind the rock rather than, oh, I might get a handful of berries over here. Yeah, the tiger will eat you and you will not have any more decisions to make. So it doesn't need a, yeah.
You have to wait that pretty high. Yeah, that makes sense. And it's almost like getting caught up. There's a, we've had a lot of weird acronyms and like memes and all sorts of stuff come out of 2021, but the one that there's two that are really. And relating to investing is FOMO, which has been around in other places.
But it's been used a ton in the last couple of years as FOMO and then FUD fear, uncertainty and doubt. And the FOMO, the fear of missing out, it's almost you would rather you would keep you and want to keep playing, but the FOMO and then the loss of version. Make this weird cocktail where it's you want to keep playing, but you don't want to lose any more money, but you're really scared about missing out on big gains.
And so it seems like that would cloud your judgment between the two of them alone would very much cloud your judgment. And did you find that was more the case. Did it matter what the overall market was doing or did it really, you were just focused on one stock and so it just mad at what that one stock doing.
It depended on. As I got more sophisticated, that'd be doing diametrically opposed trades. So on like Vicks leveraged Vicks. Versus a leveraged ETFs or even single stocks. But essentially playing both when if you've got some sort of thing that's going to be the inverse or short sells or options, you've got calls and puts on the inverse and you have a volatile enough security.
You can be pretty sure if there's enough applied volatility, you can be pretty sure that you can buy when it's down and. Then sell whatever you have that would correlate to it being up. So you're essentially saying when this one thing that is valuable when the other thing is not valuable and not valuable, when the other thing is valuable, I'm going to buy both.
I'm going to, I'm going to simultaneously have both, but not necessarily at the same, not with the same weighting. And so you're essentially, you're going back and forth as volatility goes up and down as the price goes up and down. Yeah. Really in some ways you're counting on volatility and change, but the market is always changed.
So there's always going to be movement right now. The key with that is that was in a pretty flat market, which you need, you can't have a stock that just dives and you're buying the inverse thing expecting. So it doesn't no strategy is perfect. But to get back to your question, not to dive, we could dive way too deep to get back to your question.
It's an interesting point because I think. Even in a strategy like that's pretty quantitative. It could really be easy. To pull the qualitative elements of the FOMO, the FID like it's very easy to pull those things back in as a human being. Even if you start off with a plan and say, this is just a quant thing, and this is what I'm going to do, it's so easy to hear someone say, oh this thing's going to go way up.
And sometimes it's a game stop like that should have listened, which I listened to that more, but it's very easy to get sucked. A specific plan and start doing your own thing without actually looking into it. And you oh this could work over there too. I don't want to miss out on this.
So there's a lot to that. And it's something that that's part of the reason why I stopped being so like, I, it, it takes, I, I believe it takes a psychological energy to keep yourself from. Falling prey to the biases and the heuristics and everything, because you're constantly having to check yourself and say no, hold on.
And I, at least for me, that takes up energy every time you're doing that. It's draining and tiring. Yeah. And there's only so much willpower that you can have in a. Day or I don't know necessarily, we said in a day, but probably around the day or a week time. So you're using up a finite amount of willpower every time you have to check yourself, but that strategy like that.
So that makes sense. And some people are great at it. I mean like the top traders in wall street, they're probably just incredibly good at. Understanding themselves and willpower and how to mitigate stress and take quantitative opportunities, but also way exterior information. So there's so much going on.
So it's it depends on your personality too, which I think is the reason why the vast majority of people just go with financial advisor or an IRA with ETFs or something like that, because there is energy that's required to be in those kinds of things. Yeah. And I it's, it is always interesting to me.
People are like I want the like quant returns. I want the wall street returns, but I don't want to do anything. And I'm like there's a premium, you pay to get those returns, whether it's a financial premium or like you're saying an energetic premium you have to pay a premium to get that.
Yeah it's always interesting to see that. And that's also just Everybody's looking for the the pill, the easy fix, easy money. And if it was easy, we'd all have six packs and be rich billionaires like there, there is a, there's a reason willpower is hard and sticking to a strategy is hard.
So in a bear market like this, where it seems like we've walked, excuse me, we're not a bear market yet. I'm not calling it, but in a a, in a market like this. You now have what, like what I just said you have headlines saying, oh, it's 2022 going to have a bear market. What's really interesting to me is.
It wasn't like 2021 was a great year. As far as catalysts, there was a lot of craziness happening. We broke records on inflation. We had all sorts of COVID scares and relaxed downs and opening back up and then shutting countries off and just a trade craziness. There was a lot of turmoil in 2020.
And so what's always interesting to me is when you have a like a market reversal where you're going really hot, it looks like, oh, stocks just go up. And that's what the when you're, when your barber is like giving you a financial advice and then something a little wild.
But when we're in that situation, and then we have a reverse. And we start seeing some down days and those days string into weeks and the week stringing a month or two. And we start seeing this reversal. What's interesting to me is how much is how, and I don't know whether we can answer this question, but I think a large amount of that is driven by some, of course we've got the invisible hand of the market.
But some of that is driven by just like a collective psychology around where we think the future. Is going to go. And what's interesting to me is what's the catalyst there because it's not necessarily, certainly not the talking heads on TV. It's not us bozos on the podcast here. It's no, pundant that definitely goes ahead and just says, oh yeah this is where the market's going. And then boom, that crashes the market. No one thing. It's not necessarily interest rates or the easing or it's not necessarily one thing. But it does seem like there's some collective. Mind, but this goes okay.
Yep. We're going to go left now instead of going, what's your take on that? Is it you, do you think we could ever really understand what the catalyst is for that turn or that turning point? Or is it just theorial, it's going to be it's one of the mysteries of the market, if you will.
That's another really good question. And it's like the, there's almost it's almost a hive, mind, the marketing, the different nodes, and it's a whole colony of ants that are all noodling around. That's a good point of what are the catalysts of that? It's I see. We haven't seen, for instance, earnings have not been that bad.
And some companies have been very good earnings calls the last couple months. It's not necessarily, I don't necessarily see a gigantic oh my gosh, everything is so overpriced. It's every good thing is going to go down 50 to 75%, something like that. I really don't see that happening. I see certain stocks very well.
If they're getting caught up in psychological things going on, they very well could. And I definitely think I've definitely heard a lot of people saying, okay, this is going to be more value stocks, more old school, gold miners, Goldman Sachs banks stuff. That's just pretty darn normal and makes returns and pays dividends.
Even just personally, I've shifted a lot of my strategy because of the market have shifted a lot towards those more value stocks, low like lower priced good dividends, solid methodology good for selling covered calls and just riding around. Yeah. That's a kind of a. Point you were saying, you're just buying like traditional value stocks and then some uncovered calls on them, which is not a bad way to go have some quote unquote free income for those stocks.
But it is interesting. It's like maybe it's a shift in mentality and with a crowd it's so hard to pick out like, okay, what was the catalyst for this? So it's an unfair question. I know that going in. I knew that but it is interesting because. There definitely seems like it's a shift, but of course, just like the six packs and being a rich billionaire, if everybody knew when it was going to shift, we'd all make a lot of money, but then that would feed the shift because it just wouldn't chip.
Yeah. You know what I mean? Like it's like the passive versus active rebate. Can't be all active. Can't be all passive. Otherwise neither strategy would really exist. Yeah. And this is a good question though, because. And we can dive in a little bit, because I think that what we're seeing, because it's not this massive drop, it points almost to more of a grinding pessimism.
It's not necessarily a, oh my gosh. We're screwed. It's geez, like COVID is really dragging on. There's just the supply chain is as far as I know, not doing a ton better. It's not. In a crisis mode, as far as I know, but we're not seeing oh my gosh, everything is great. And I think a lot of individual people and institutions thought that by now, okay, everything's going to be pretty solid, like we're back in the upswing.
So it feels more like a kind of rare. Grinding pessimistic market, rather than what is talked about, which is a big crash or something like that. That's interesting. The headlines have to be, if it bleeds, it leads, right? So the headlines have to be catchy. So that's why they go for the big crash and all this red and blah, blah, blah.
But it is interesting what you're saying a grinding. Pessimism I think is a good way to put it because I was looking at the, just the one-year chart from today back one year. And if you just look at the one year chart it is not quite it's pretty impressive, but it's not quite as impressive as when you zoom out, look at five-year chart, or if you looked at the two year trend, obviously that would be very impressive.
The run-up I think in 2021, Pretty outrageous, but that might just be the reference point of having that huge catalyst of COVID happening and everything shutting down. And you see that UV, but in 2021, it almost looks like we were hanging on to to parallel your pessimism. We were like hanging on to a grinding optimism and oh, don't worry.
We're gonna get back through. And now people are just like tired of. And they're tired of being so optimistic, which is a very sad thing to say. I don't mean to be such a downer, but it seems like people were. Begrudging and that'd be gradually, but hope hopeful and very optimistic.
And we're like really trying to push that. And now it's just oh, okay. This is a calendar year turn. It's 2022. And we're still dealing with this. Are you kidding me? I know for me, just personally, like 2021 was such a weird year. It almost it almost seemed like it didn't happen in a way.
Because it was very similar to 2020 in some ways, but very different. And it was in this weird Twilight zone. So maybe that's a, maybe that's a collective thing too. And people are getting out of the Twilight zone and going, huh? We don't like wanna reevaluate here. I don't know.
But that is interesting that you said it that way. It's like a grinding pessimism instead of this catalysts that just. Yeah, it makes us deep V in the chart it is interesting. So in a situation like this, I've noticed myself even going dang. Like I. So in the cryptos that I hold a small amount of crypto that I hold, there's one cosmos that's really booing the whole thing up.
Cause everything else has just dropped. And in the stock side of things I don't really hardly look at most of that. Most of that's just long-term and an IRA. But I have made like some a call position recently just cause it was very nicely priced. In both of those sections, like the crypto side and the stock side, it's very interesting to look at it and go, dang.
I bought in at this price and now I'm way below that. And it makes me. At first, my first reaction is, oh, wow. I should not find anymore. But then I think I stopped myself and I think through it, I'm like, oh, actually, no, that means it's on sale. I should go buy more right now if I believe in the underlying asset, obviously.
But if I don't believe in it, I don't know why I'm holding it. So it is interesting. Do you think there's more than just that more than reminding yourself? Okay. This means everything's on sale. I should go buy. Again, this isn't, we're not telling you to buy, you can do whatever you'd like, this is not financial advice, but you think there's more than just reminding yourself okay, this might be a buying opportunity.
Is there something more how do you qualify that? Okay, this is a buying opportunity or no, I just need to hold. And I think it's probably a prudence thing. And so part of it, I think was probably a prudence thing where you need to evaluate what the goal is for that pool of money and then see how you want, like how risky you want to be.
Yeah. And I think the really unique and interesting thing, which I haven't seen it talked about a ton yet, but the fact that interest rates are going up. Obviously that is most likely going to cause a lot of institutional money to go out of stocks and into bonds and into a true more interest rate focused things because now they're actually viable again.
So there's a question of have stocks just been. Artificially propped up by the fact that you just can't make money on anything else. Because that's really a serious problem. There were preferred stock funds that were paying really nice dividends that looked far more attractive than a bond fund, which is weird because it's an underlying, it's an equity it's going to be volatile.
It be very volatile. So that was weird to look at in 2020. Huh, I would rather buy this, the stock fund for my bond portion of my portfolio. This doesn't make sense. So that's a good point. Maybe that's part of the rotation. I don't know that's been fully appreciated yet. But usually the market is pricing in future returns, not today's returns.
So maybe that's some of the sentiment underlying and just hasn't been spoken up loud yet, but that's the point. Yeah. Cause I think th the sequence of events that's occurring right now is very unique in that even just psychologists looking at my own psychology book, Hey, how do, how am I planning out my my next moves in whatever market it's okay, I would love to have more liquidity to buy more stocks since it's going down.
Yeah. But with inflation things are getting more expensive and the stocks are going down at the same time. So this bad double negative going on there. And so it's weighing that comparative to the, okay. Should I be throwing this in a bond or in a high interest savings accounts that I. Extremely liquid.
If I need it, should I be going heavy into these value stocks? Because I'm going to go back up. Do I need to be using less liquidity? Should I just keep things in cash for a little while and see what happens? So there's a lot of different psychological inputs that are going on because it's a very complex situation and you've got COVID and supply chain, difficulties.
Yeah. All sorts of other stuff going on. So there's a lot of uncertainty in the market right now. Yeah. So uncertainty, we've got the FID fear, uncertainty and depth. To out necessarily right now, a lot of things that fall into place, I think before the fed made their moves clear, there was a lot of doubt and people were not sure where the direction was going to head.
So I think there's less doubt and uncertainty, but there's definitely fear. And just a general uneasiness going into 20, 22. So when I look at that, I go, okay for my strategy of long-term just buy and hold, just Hoddle and on the SMP baby. When I look at that, I'm like, okay, great.
It's almost just a it's just an opportunity for me to get in at a low entry price, honestly. Most of it's automated. So I just think to myself, oh great. My, my by this month is going to be cheaper than it probably would normally be so that's nice, but is there a certain throwing in all of, obviously there's many different classes of stocks and different different sectors that we could look at, but throwing in different things too.
Like the alts, like we mentioned Vino vest before that's like a wine investing platform NFTs crypto, do we use. To those in a situation like this, where there's a lot of uncertainty because you hear the term like risk off mentality. And I think that's being used a lot to explain the crypto sell off.
And it's been wild to notice how tightly correlated. It seems stocks and cryptos are when there's no. Underlying fundamental connection. That's been interesting, but we were looking at the NFT space like few days ago and that was still booming. And maybe it's because like my thought is maybe it's because a lot of those are built on Ethereum and when you transfer, you have gas fees.
Now that theory comes down. Okay. There's more gas fees. Or excuse me, there's less gas fees. So it's easier to transfer their more market activity and therefore it's booming. Looking at this without thinking of our own biases and our own psychology, we would go, oh, okay. I need to be afraid.
I need to hoard more cash. Don't put it to work. But is that the wrong thing to do? Should we be looking outside of stocks and crypto and be thinking about it differently? Maybe the maybe the option is to. Put some of your cash to work and buy a house. I don't know. What are your thoughts there?
Like coming at it from a different angle, realizing we've got some psychological biases going on. I think that's really important thing to note an important question, because we've talked so far, we've talked mostly about what's going on, right? But as the name of the show, it's the long run show.
So stuff like this will happen as the years go by and over again. So I think it'd be helpful to have a framework around exactly when it comes up again what to do, or at least what questions to ask, not necessarily what to do. Yeah. And I think that it's a really interesting the kind of realm of alternative investing seems to really have boomed in the last like year and a half.
It's funny because you would think that would boom, when stocks weren't necessarily doing well. They're like, oh, I need to, I need a alternative, but it's really seems more oh, I made a ton of money on these stocks. They're probably going to have to go down at some point. So I want to take that, take the return and put it somewhere else.
So it's a very interesting chain of events. And because of that I think that there's gonna be. I think there's possibly going to be less alternative investing as the market trends down because there's going to be less returns for people to take and say, I've made good money on this. I'm going to put it in all rather than I think a lot of people are going to hold or buy more stocks as they dip theoretically, which will, I think paradoxically is going to reduce the amount.
Maybe not the value. I think the value of an alternative investments could continue to rise, but I think less people will. Investing in alternative investments because oftentimes there is a liquidity problem and in a situation with high interest rates with well, higher mission, essentially, no, the high end, this is not a high interest rates, higher Israel relative.
It's not really what you think with a slightly increased interest rates and relatively interesting inflation. I think that there's this there's a liquidity and gonna have to get all Keynesian and the liquidity trap. I don't think, I think we're okay. Nothing like that, but there is a liquidity problem with a lot of alternative investments.
Yeah. And it's, it varies that's the premium you pay for non-correlated asset. So it makes sense. I do. A lot of the time alts get alts is like a lazy way to just say real estate. So I don't want it. I don't want people to think we're just thinking, oh yeah. REIT or buying and holding your own real estate.
Cause there's more than that. There's I don't know if I would necessarily call crypto and all. I don't know, I'm still unsure on that, but there's Vino vests. There's buying art. There's even some art funds like Beano vest there's platforms out there where you can buy like a portion of an art piece, like masterworks and stuff like that.
So there's things that are very uncorrelated, but you're right there probably is going to be the problem of, okay. Do I want to tie my money up in this for five years while I don't know what's going to happen? One year. And I think if it was just a choppy market or a down trending market would be different, but it would be very like it would, people would look at it and go, yeah, maybe I'll throw some money in and also to diversify and get away from this choppy market.
But I think with the inflation, that added factor, that's something that everyone's actually. Especially like you go to fill up your car and it's more expensive than it was six months ago or eight months ago. And so that's something that everyone's noticing and actually directly feeling, whereas interest rates a ton of people refinanced in 2020 when interest rates went down.
So they're locking in those loan for 10, 15, 20, 30 years. They're not going to feel the interest rate. Directly they'll feel another ways obviously, but they won't feel as direct because they refinanced and their interest rate is now like one and a half percent or something stupid. So they're not going to feel it as much as inflation, which adds to the uncertainty.
And so if they hear spooky headlines coming from wall street and they see inflation impacting their lives directly, I think that makes people even the most. I don't want to say advanced, that's not the right word. That's not the word I'm looking for. The most sophisticated, like investor is going to be thinking about inflation and they're there.
I don't care how much money you have. You're probably going to notice it somehow. And so I think that adds to this kind of like uncertainty of do I want to put my money elsewhere and lock it up when I don't know what I'm going to need it for. In the near future. Because inflation is just like a spooky thing.
I've talked to a few people recently about it, and it's just a spooky thing to a normal person who doesn't think about finance as much as we do. It's really spooky because they're like I put my money in the bank and now you're telling me a year it's in a year, it's going to be 7% less in value.
Like it just sat there. I didn't do anything with it. What the heck? And so that, that is that like psychologically is terrible. To think about your money losing value without you doing anything. Yeah. And I think that what you just touched on, I think comes back to the psychological principles and saying, okay, if we're, if we for thinking like psychologically people might be selling their stock and putting money in alternative investments right now, or something like that.
Using reverse psychology or figuring out those psychological trends and saying, all right, I'm going to be a contrarian. Usually you can do pretty darn well. And so stuff like the markets, like if you buy the dip, if you buy the baby in March March 23rd. Yeah. You would've killed a huge potential.
So maybe there's a, in terms of your long-term, how you think about your portfolio of the markets and. I think that there is real value to taking a contrarian approach of because even just in the situation that were just talking about, let's say you have real estate holding, we'll see all alternative holdings.
When is your time horizon for you're going to sell? Because maybe the best thing to do is sell that now and buy a bunch of stocks as they're trending downward. Maybe not. That's just an example, but in a situation where your kind of first instinct is to say, oh, I've got to get out of stocks. Also good.
They've been going up for awhile and then jumping to ALS, maybe you've made a lot of alerts and you're like, I have a lot. I Real estate. Market's been crazy. When do you pull out, when do you take the return on that? Yeah. And then what do you do with it? I think that, so that kind of leads me into to our takeaways, key takeaways for the, for this episode and mine are not necessarily oh, look at this sector, look at consider this innovation or whatever.
My key takeaways from all of this conversation are when you see. A lot of uncertainty and you see a lot of red in the market and maybe we're trending towards a bear market when you see that happening. First thing, take a deep breath or five chill out a little bit. And that's hard to do. I'm saying that kind of glibly, but that's hard to do chill and then ask yourself, okay.
What is my goal for the money that I have that is at risk? And so that could be in your stock portfolio. That could be crypto. It could be . It could be real estate. It could be the money in the bank and you're considering inflation. What's the goal for that money. If you don't, if you don't need that money for 10 years at the shortest.
You really, probably don't need to worry that much. If it's a long time horizon, you really don't need to worry. Now if it's within a year and you're saving up for a down payment and you're really concerned, and you have it in a stock portfolio and it's coming close to the time where you're going to need to plop that down payment in cash.
Okay. You probably want to make, have a plan of action, but understanding your goal for the money that you're concerned about, I think is the number one. Question and then you can get into, okay. Once I know the goal for that money, how do I want to react to what's happening? But that's my biggest takeaway here is ask what's the goal for the money that's at risk and that you're concerned about, what's the goal for that money and then go from there.
Yeah. And I really liked that because that's your understanding. And I think that gets back to when something positive happens when you make a ton of money. Cause we've talked a lot about the negative. Yeah of psychology, but just stuff on the positive a little bit, it's having that plan of when you buy Bitcoin at a hundred dollars a coin and it goes up to 60,000 like having a plan of okay, I'm going to, I'm going to take the return or not, or whatever.
Again, going back to the goal of the money in a positive scenario, you're oftentimes gonna naturally think it's just going to keep going up. Or there's a whole, there's a whole host of different ways that you can trick yourself. So I think the classic adage of know thyself.
Just crucial in life in general, but definitely in the markets as well. And in good times, and in bad, just taking the time to understand what's going on. Like you said, it's exactly that. Do you park in your stack? You can't take it with you. But having that, I really liked what you said in a good time, stepping back, taking five breaths.
Yeah. Saying, okay, is this enough work? According to my plan, according to my, what I'm the goal is? Do I sell because maybe it's not yet maybe it could make a much more, maybe it doesn't. So there's so much interplay there that I really liked when you said, take a step back, take five breaths, take five minutes.
If you need to thyself. Yeah. And I think that also pairing it with. Getting an outside opinion that you would trust? That can be invaluable because you can definitely get caught in your own head again, with those own biases of, oh, it's just going to keep going down or, oh, it's just going to keep going up.
I need to stay invested. You definitely having an outside person come in and say. Hey, have you thought of this? Cause they're going to come at it from a different angle. That's really helpful. And also all of this is underlying having the willpower to do that, having the Boulevard at step back to know what your goals are and have a plan behind it.
And that's not necessarily something that everyone's good at. Sometimes I'm not very good at. And so like I, a lot of times have to talk to people who are smarter than me and go, Hey, what should I do here? And so the. That's something where I think having just a little bit more awareness around why you're doing what you're doing with your with your money.
I think that helps out with the psychological biases, whether good or bad that you said could be in the positive direction, could be in the negative direction. Yeah, that sounds about right. Awesome. This has been another episode of the long run show and definitely tune in next time. If you can't leave a rating and review on whatever platform you're listening to right now, that would be fantastic.
Definitely. The five-star reviews help. If you want to leave a one star. Just don't come pester us on LinkedIn. That'd be fun if you really want to leave a one-star just message us on LinkedIn. Find us. We'd be happy to understand why you wanted to leave one star unless you're rude. And I just want to ask you, but other than that, we appreciate it.
Appreciate you. We'll look forward to having another discussion next time. Thanks for listening. And we'll catch you next.
Support this podcast at — https://redcircle.com/the-long-run-show/donations
