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The Math is Easy. The Psychology is Hard.

Money and investing success have more to do with managing your personal psychology and behavioral tendencies than being a math wizard.

Before you can invest, you need to be able to save. Humans are naturally hard wired to seek pleasure and avoid pain in the short term, and this can cause people to spend with impulse, rather than thinking about the longer-term consequences and benefits of saving.

Once you’ve managed to save some money to invest, natural “fear of missing out” as well as “fight or flight” emotions can cause people to buy and sell investments at the wrong time. The hardest thing to do in investing for many is to be patient. Humans have a natural “recency bias”. This refers to the fact that we naturally give greater importance to the most recent event and tend to think that whatever just happened will continue to happen.

It’s not easy to know when you should listen to your instincts, and when you should ignore them and be patient. Many experts recommend that you not look at your investments too frequently for this very reason. It can also help to have a trusted, experienced advisor to help you make decisions. Oftentimes, the true value of a professional advisor is to help you manager your emotions during both the good and bad times in the markets.


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