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Instincts Can Hurt Thumbnail

Instincts Can Hurt

Following Instincts as an Investor

The photo attached to this post is from my home in Chapel Hill, NC.  It is a 4 ft Black snake that made the unfortunate error of sliding into my garage and being discovered by my wife.  After I scraped her off the ceiling, this little guy/gal met an unfortunate ending due to its instincts.

Black snakes move slowly, like to climb, and will coil up in an aggressive looking crouch when frightened.  (I wish I knew this when I first met this guy/gal)  I spent 20 minutes clearing a path to the door, and another 40 minutes trying to coax him/her to make an escape.  Unfortunately, instinct kicked in and he/she refused to move, just kept trying to strike when prodded.  Instincts that might work well in the natural world, but not when in contact with humans.

Understanding your Investments

Humans face a similar problem in the investing world.  Our natural tendency to want to fight or flee – instincts that have been honed for thousands of years – but are not compatible with financial markets.  I strongly suggest to clients that they read Daniel Kahneman’s Thinking, Fast and Slow1 to get an understanding of how our natural responses can work against us.  The key concept is that we want to think fast, when thinking slow is what is required.  We are not wired for financial success, just as a Black snake is not wired for interactions with humans in a garage.

This is not trivial stuff.  I will highlight in another post the scale of the damage that we can do to our portfolios if we think fast instead of thinking slow.

Do you have more questions about managing your portfolio? Feel free to reach out! 


1. https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555