With some 95% of its activity occurring subconsciously, your brain can be quite tricky. With every spontaneous signal, our cerebral synapses expose us to countless behavioral biases, duping us into making misguided money moves long before our rational resolve kicks in.<\/p>\n\n\n\n
Since many of our most powerful biases are based on reflexive rather than reflective thinking, it\u2019s not enough just to be aware of them. We must also learn how to defend against them. Or better yet, turn them to our advantage. How do you do that? By tricking your brain right back.<\/p>\n\n\n\n
In their aptly entitled book, \u201cNudge,\u201d Nobel laureate Richard Thaler and co-author Cass Sunstein refer to this sort of trickery as a \u201cnudge.\u201d As they describe it, nudges should not replace your free will; they should just make it easier for you to make your own best choices.<\/p>\n\n\n\n
Nudges don\u2019t have to come from outside influencers, either. You can nudge yourself.<\/p>\n\n\n\n
For example, we\u2019ve long known about putting your personal saving habits on auto-pilot. In 1926, when George Clason first published his timeless classic \u201cThe Richest Man in Babylon,\u201d he described this as learning to \u201cpay yourself first.\u201d By forming lifelong \u201cpay yourself first\u201d habits, you can replicate within your personal accounts the same saving success found in the retirement plan world. Leveraging what Thaler and Sunstein refer to as our \u201cyeah, whatever\u201d bias, the trick is to shift away from saving what\u2019s left after spending. Instead, set aside your savings before spending the rest. In so doing, you\u2019re once again using inertia to your advantage.<\/p>\n\n\n\n
We\u2019ve also long known how susceptible investors are to FOMO (fear of missing out), loss aversion, recency, and a bevy of other behavioral biases that trick us into chasing breaking news, rather than maintaining a more sustainable long-term perspective.<\/p>\n\n\n\n
Watching the market\u2019s bouncing ball can also leave you more unhappy than if you only check in periodically. As Nobel Laureate Daniel Kahneman observed:<\/p>\n\n\n\n
\u201cIf owning stocks is a long-term project for you, following their changes constantly is a very, very bad idea. It\u2019s the worst possible thing you can do, because people are so sensitive to short-term losses. If you count your money every day, you\u2019ll be miserable.\u201d<\/strong><\/p>\n\n\n\n So, don\u2019t do that. Don\u2019t let yourself look at the market\u2019s daily news. Instead, nudge yourself into staying focused on what really matters by limiting your looks to quarterly, or even annual performance reviews.<\/p>\n\n\n\n Arguably, one of our greatest behavioral foibles may be blind-spot bias, or our inability to see our own biases, even when we can readily spot the same tendencies in others.<\/p>\n\n\n\n Kahneman was famous for going out of his way to seek feedback from others, especially those whose temperament and perspective differed from his own. In his final publication, \u201cThinking, Fast and Slow,\u201d he explains:<\/p>\n\n\n\n \u201cWe are often confident even when we are wrong, and an objective observer is more likely to detect our errors than we are.\u201d<\/strong><\/p>\n\n\n\n At Azzad, we believe one of our most important roles is to serve as our clients\u2019 \u201cobjective observer,\u201d holding up a mirror whenever a blind spot may be blocking their financial view. If we can assist you in similar fashion, we hope you\u2019ll be in touch with us today.<\/p>\n","protected":false},"excerpt":{"rendered":" With some 95% of its activity occurring subconsciously, your brain can be quite tricky. With every spontaneous signal, our cerebral synapses expose us to countless behavioral biases, duping us into making misguided money moves long before our rational resolve kicks in. Since many of our most powerful biases are based on reflexive rather than reflective […]<\/p>\n","protected":false},"author":1,"featured_media":21474,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[9,13],"tags":[],"class_list":["post-21471","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-retirement"],"_links":{"self":[{"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/posts\/21471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/comments?post=21471"}],"version-history":[{"count":1,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/posts\/21471\/revisions"}],"predecessor-version":[{"id":21472,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/posts\/21471\/revisions\/21472"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/media\/21474"}],"wp:attachment":[{"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/media?parent=21471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/categories?post=21471"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/intelliserver.net\/wordpress\/wp-json\/wp\/v2\/tags?post=21471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Blind Ambition<\/h2>\n\n\n\n