First, let's start with an empathy gap. When you're starving, don't go to the supermarket! You will overbuy. When you are in cold weather, it's tough to imagine that you are in hot weather. That is an empathy gap. As James Montier says in his book called "The Little Book of Behavioral Investing," it says "This inability to predict our own future behavior under emotional strain is called an empathy gap."
The Perils of Procrastination. We tend to do our job at the last minute. Unfortunately, last-minute work brings the maximum error you could possibly make. Research has shown that groups with a deadline show many errors, yet they submit them near the deadline. The other group who asked to submit it whenever they like to make fewer mistakes, yet they submit it nearly 3 times faster than those who have deadlines.
This can be the arsenal for us to fight empathy gaps and procrastination. Pre-Commitment.
Remember seven P's-: Perfect planning and preparation prevent poor performance.
Meaning that we should do our investment research in a cold state of mind. When our thoughts are in the most rational state possible. Sir John Templeton says, "The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell." Yet when everybody's do buying, it will be tough for us to think for selling it. What you can do is make your buy position in which range of price you already set before you actually look to the market. In this case, maybe your range of price is around 40% below the actual price, but if the market in the future plummets by 20% overall, you will have difficulties actually buying it because of the crowd's noise. So set your target price before you look at the market is a good strategy to fight an empathy gap.
If you find this blog inspires and helps you. Or maybe entertain you. Please consider sharing it with your friends and family. Maybe they need it. Protect each other. Cheers.
Comments