Friday, Mar 20th 2020

Tame your inner Elephant


"When will we see a bottom?"

Many have been quick to chime in with their predictions, trying to play expert. The reality is most of them will be dead wrong. It's impossible to predict a market bottom. But let's suppose that you are a Market Genie and can forecast it perfectly.

You're still missing the most important skill: controlling your inner Elephant.

Psychologist Jonathan Haidt argues that we all have two sides: an emotional side (the Elephant) and an analytical side (its Rider). 

“Perched atop the Elephant, the Rider holds the reins and seems to be the leader. But the Rider’s control is precarious... Anytime the six-ton Elephant and the Rider disagree about which direction to go, the Rider is going to lose. He’s completely overmatched.”

You can be a Kentucky Derby-level Rider, but without mastering your Elephant, you're going to lose. With every negative headline, your Elephant becomes less controllable and will force you to sell, when you should be doing the exact opposite - preparing to buy.

We get it. This COVID-19 is hard stuff.

We're doing everything we can for you: from shorting the market so you can earn profits to giving you real-time updates on your companies. But with no lock-ups on your capital, we don't control your Elephant. We leave that to you.

If you can control it, you should do two things:

  1. Add capital regularly on the dips (Rider)
  2. Ignore the apocalyptic headlines nudging you in the wrong direction (Elephant)

Here's Warren Buffett's Elephant Master, Charlie Munger, when asked during the '09 crisis how worried he was:

"Zero. This is the third time Warren and I have seen our holdings go down, top tick to bottom tick, by 50%. If you're not willing to react with equanimity to a market price decline of 50% two or three times a century you're not fit to be a common shareholder and you deserve the mediocre result you're going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations."

Tame it.

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