Flying on Autopilot
We often hear financial experts say “put your finances on auto-pilot”, and there is plenty of data to back up this strategy.
But something about it feels intuitively wrong – when I’m making important decisions with my money, shouldn’t I continue making those decisions every step of the way? Well, unfortunately for us, humans make bad decisions based on emotion all the time…
Even the most sophisticated investors make poor decisions. Paul Graham, partner at VC firm Y Combinator, talks about counterintuitive knowledge in a recent article on his blog. While funding startups is very different to retail investing, the emotions involved are the same. Paul talks about making decisions you know to be right, and how to stick with them when irrational instincts kick in:
“To succeed in a domain that violates your intuitions, you need to be able to turn them off the way a pilot does when flying through clouds.”
Carl Richards touched on something similar last week – what we refer to here at Betterment as the “paradox of choice”. It’s important that we, as investors, are informed … but too much information can get in the way of being a good investor. Anxiety, rather than clarity, is often the result of an information overdose.
It’s good stuff so take a look:
Original content by Betterment
How would you like to get started?
Manage spending with Checking
Checking with a Visa® debit card for your daily spending.
Save cash and earn interest
Grow your cash savings for general use for upcoming expenses.
Invest for a long-term goal
Build wealth or plan for your next big purchase.
Invest for retirement
Set up traditional, Roth, or SEP IRAs to save for the golden years.
See details and disclosure for Betterment's articles and FAQs.