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☕5 Ways Investors Overthink & the Cure

Feb 13, 2024

Good morning! 👋

There’s not a lot going on that we haven’t already talked about...

AI continues to blossom, NVDA is charging higher and, of course, inflation data came in hotter than expected. Predictably, futures are in the red.

So I thought we’d switch gears and talk about something that trips up a lot of aspiring investors and traders.

Overthinking is a far more common problem than you’d believe.

The reason may surprise you.

We’re led to understand that the more choices we have – in life and in the financial markets - the more freedom we’ll enjoy and the more wealth we’ll accumulate.

Only that’s not true.

More opportunities mean more choices and more choices mean that it’s harder to make decisions. Predictably, many investors fall into a hopeless spiral that works against ‘em by wasting so much energy trying to consider all the options that they can’t pick even one.

Frustration, hopelessness and worry often follow as do poor results.

It’s totally fixable.

Five kinds of overthinking you’ll want to recognize (and overcome).

#1 – Mindless mental chatter

Contrary to what scores of TikTokers and Finfluers would have you believe, you cannot tell yourself to think about something. And the more you do, the harder it is to move on.

The Cure: Switch the channel by doing something that requires total concentration. Walk away from your screens and put your phone down. For me it’s motorcycling on a new road or hiking with my bride and our dogs, Lucy and Bryce. For you it might be a great workout or gardening.

The point is that you want to force your mind to move on.

#2 – Reading into things

You’re not alone if your mind goes into overdrive and you’re prone to imagining all the terrible things that might happen when the opening bell rings. Most of which are self-inflicted, I might add.

The Cure: Try starting from a position of “I can do this” rather than fearing all the things that’ll happen if you don’t do whatever is bugging you.

There’s stuff you can control (like buying world class stocks in companies making must have products and services) and stuff you can’t (like the Fed, elections, China, Russia and more).

You get the idea.

Keep it relevant – you’ll be amazed by what happens next and the results you achieve!

#3 – Masquerading as a mind reader

The world is set up to bombard us with information. Seemingly everything matters but, in reality, very little actually does.

Do you really need to know that...

...Taylor Swift partied after the Super Bowl ... with her parents – gasp!

... Or that the 3rd derivative of the 6th line in XYZ’s upcoming earnings report might mean the price of green doors in Mongolia will change because some analyst who never worked for the company thinks management didn’t meet expectations?

I don’t.

I’m far more interested in companies like Apple and Microsoft that are tapped into the 5Ds because they’re backed by trillions of dollars that will be spent practically no matter what the Fed does next, who’s in the White House and how Wall Street tries to rig the system.

History shows very clearly that profits will follow over time.

The Cure: Stick to what matters. Your portfolio will thank you.

#4 – Longing for the past

It's normal to long for the past but when it comes to our money and to achieving success, the far more profitable course of action is to think about the future. Then make it happen.

Dwelling on the past is like driving using your rearview mirror. You may find that comfortable, but the markets are forward-looking.

The Cure: Getting stuck in a mental loop isn’t something we can always control. But it is absolutely something we can change if we focus on achieving our goals. That's the forward looking part.

#5 – Worrying about what might happen instead of what’s likely to happen

Many people fail because they worry about all the things that could go wrong. Focus instead on what’s likely to happen and the path to profits will almost always reveal itself.

The markets have spent 83% of the time at or within 10% of all-time highs since 1927!

83%!

The Cure: Set a timer and give yourself 5 minutes. Write down everything about the markets that’s bugging you, causing you trepidation or otherwise making you overthink your life and your money. When the timer goes off, crumple your paper, bin it and move on.

Yes, it really IS that simple.