A recent post on LiveWire (link below) identifying 11 habits to avoid for better investment performance is worth a quick look, not just for how it could help you as an investor, but for how a better understanding of the habits it refers to can help you in everyday life.
The post identifies 11 natural human behaviours that are often counterproductive when applied to decisions with a financial consequence. While the focus of the post is on the impact of these habits, or biases and heuristics, in the context of selecting and managing investments, they are biases and heuristics displayed in our everyday lives and consequently have a much broader, and potentially much more substantial, financial and personal impact.
A key thing to understand about these biases and heuristics is that it is almost impossible for you to not be impacted by them. It is the way we humans are wired. Your best defence against suffering the pitfalls associated with these biases and heuristics is to acknowledge they are real and, more importantly, that you and I are not immune to them. You will then be able to get better at identifying how they impact your decision making and you may even be able to develop strategies to counter them.
While it is a major oversimplification, I believe the single best defence can be time. For important decisions, take the time the decision justifies. Give yourself time to think of the benefits and disadvantages and be critical of your own thoughts. Seek the external help you need and be careful not to be blinkered in your thinking.
Of course you can’t and shouldn’t do this with all decisions you make. We simply have to make too many during a normal day, but when it matters, take the time.
For those interested in developing a better understanding of how the way we think impacts our decision making and behaviour you’ll be pleased to hear the available literature is expanding. A good starting point is pretty much anything written by Daniel Kahneman (try Thinking, Fast and Slow) and Richard Thaler (try Nudge & Misbehaving).
This advice is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each person are different and you should seek advice from a financial planner who can consider if any strategies or products mentioned are right for you.