| Promiscuous Investing, Chapter 4 – Regret Me Not
Promiscuous: "indiscriminate; casual; irregular; haphazard."
If reading this, you've been around long enough to regret some decisions. Regret is viewed through hindsight and often is accompanied with the "coulda woulda shoulda," awareness.
That is, with the chance to do it again we would do differently and avoid all the unpleasantness. This reminiscence seems an easy chance to learn from our mistakes, an opportunity to assure ourselves 'we'll never do that again.'
But this assumption can be dangerous. Being aware we've made a mistake is not the same as being aware we are about to. Thinking 'this is the last time I'll ,' beckons over confidence in our own wisdom.
The exact circumstances usually don't appear again. Applying lessons learned to different variables in the future is more difficult than we might think.
Buddha's second of his "Four Noble Truths" is: "All misery is the result of attachment."
This means most mistakes are based on emotional responses to what we perceive around us. For example, when appearances are grand investors are inclined to attach to what that could mean for us, our money, and our ego.
When things appear less rosy, we are tempted to attach to the idea there is a better way than what we have been doing, no matter how sound it may be.
Behavioral Psychologist Meir Statman studies Regret Theory: When powerful emotional components impact financial decisions. He confirms we feel sorrow and even grief after making decisions that don't pan out as we thought.
Buddha describes this "misery" as our emotional attachment to an expectation that didn't occur. Statman maintains emotional regret is so strong it paralyzes us. Many ride a stock to $0 after buying in at $500. Even after payments stop, most Ponzi scheme victims say nothing until after authorities step in.
The good news is there is some emotional relief from knowing we are not the only ones having lost money. The bad news is, each investor did so remaining attached to previous expectation of grandeur – "paralyzed" as Statman puts it.
Henry David Thoreau said, "Never look back unless you are planning to go that way." He added, "It is a characteristic of wisdom not to do desperate things."
As evidenced by decisions during grief, this is prolific advice. Everyone gets one day at a time. We can spend it contemplating past or future – or being present to the moment we have.
Wisdom is not a culmination of experience that allows us to react perfectly in every situation or know what will happen next. It is the serene acceptance that we won't - and the presence of mind to make decisions based on what we know today, not what might happen tomorrow.
Buddha's 3rd Noble Truth: "The cessation of suffering is possible."
It requires discipline and conviction, abandoning emotional attachments. For investors this means allocating in accord with their objectives and not regretting this decision when life is handing out lemons.
I welcome your questions and comments.
becker@wiserfinancial.com
Marc Becker, AIF
Managing Partner, Wiser Financial Coaching
Columnist, The Advisor Sherpa
To read past articles and view past videos, visit: www.marcbecker.tv
Trivia Time
This week's question: What happened this week that will not occur again until July 31, 2015?
Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.
The answers will be in next week's newsletter!
Last week's question: How many Michael Phelp's wingspans would it take to equal the height of the highest Olympic diving platform? Please round to the nearest whole number.
Answer: About 5. Phelp's "wingspan" (the distance from finger to finger when one's arms are outstretched) is about 81 inches, or just over 2 meters. The high dive platform is 10 meters high, 10/2 equals 5.
Congratulations to David R. and Dick W. for getting the correct answer! What clever people.
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