Trusting Your Investment Decisions

Trusting Your Investment Decisions

June 30, 2022

McGarraugh Farms finished another harvest last week which marks the 101'st wheat harvest for the family farm. Finishing up in the middle of June is rarely a good thing, the great crops usually have us in the fields through Independence Day. This would have been a great year for a bumper crop but alas we have no control over the weather.

As you would expect from a farm that has been around for over 100 years, we don't have all our eggs in one basket. Our fall Milo crop has been planted and is starting to grow and will be harvested in November. The livestock will go to market throughout the year depending on how my cousin is managing his herd. Occasionally there are opportunities for oil, gas, and wind energy exploration.  Each of these investments requires disciplined management and an understanding that most of the end results are outside of our control.

Trusting Your Investment Decisions

Like farming sometimes investing is fruitful, sometimes it is more difficult. The last decade consisted of very low interest rates, low inflation, and lots of fiscal and monetary stimulus. And stock markets were quite positive. Since 2009, the S&P 500 annualized nearly 16%1.  So long as investors didn’t bail during one of the temporary corrections, they did quite well.

Decision-Making Under Uncertainty

Investors face a very different environment today. While the future is always uncertain, today’s environment may be even more uncertain. We are living in a time of increasing inflation, increasing interest rates, and tighter fiscal and monetary policy. We aren’t used to this.

Making good decisions is always desirable. But when we face greater uncertainty, it is important that we trust whatever decision we make. A decision that looks to be “bad” in the short term can be quite profitable in the long run, and vice versa. So, how can we develop greater confidence in our decisions and trust them, even when they may not look so great in the short run?

Three Steps to Trusting Your Decisions

Take Your Time. It is normal and natural to react to things based on emotions and intuition. The brain wants to solve things quickly, so we need to engage the reflective part of our brain by not reacting hastily and seeking additional information.

Gather Information. We should spend a significant chunk of our time gathering information, including contradictory information. This helps us see things from various points of view rather than the loudest, or most repeated, viewpoints.

Talk It Out With Me. I would love to help you gather information, ask the right questions, and have a thoughtful discussion. Including an honest and objective 3rd party to help you think and talk through things is one of the best things we can do anytime we face an important choice.

We cannot control nor predict the markets, and that is OK. Because we can control how we think, analyze, and respond to the markets. I have found that how investors respond has a significant impact on their ultimate results. I am here to help you obtain the best results, despite challenging markets.

Best Regards,

©2022 The Behavioral Finance Network

  1. S&P 500 Index from 01/01/2009 – 12/31/2021 with dividends reinvested. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.