INVEST CALMLY
THE THREE-PART ANTIDOTE TO INVESTMENT ANXIETY
1) The simplicity of the long term
Nothing but long-term investment thinking makes sense to us. We see the short term — anything less than a few years — as a coin flip. Evidence supports our intuition, with studies showing good financial-market predictability over longer horizons and none over shorter horizons. And there is no better remedy for today's flood of media and turbulence of markets than a view to the soothing horizon.
2) The logic of Investment Physics
All investment expectations are not created equally, and well-founded expectations best ensure a quiet mind. While most foolishly forecast next year's return or dangerously extrapolate last century's result, our long-term expectations are based on the reliability of ”Investment Physics”. While the laws of financial motion are imprecise, they are, in the long term, useful across time and space. Amid the unrelenting noise, these laws offer a steadying signal for future saving, investing, and spending.
3) The process of thinking slowly
While humans are intuitive beings built for efficient thought, our natural inclination toward fast, instinctive, emotional thinking leads to predictable biases: We anchor on initial information; we overweight easy-to-recall examples and personal experience; we rely on insufficient rules of thumb; we believe recent trends will continue; we cling to past decisions; and we feel the risk of loss far more than the prospect of gain. All of these misleading and potentially expensive tendencies can be moderated, by consciously shifting our minds to a second option — slow, deliberate, reasoned thought.
