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Exploring the Investor Money Mindset

If you’re not an investor they can seem like a different species. But they’re human too, we’ll discuss how the investor money mindset is different.

Nerd culture is having its moment.  No one is afraid to admit they love Doctor Who or Lord of the Rings.  But no one really goes around bragging that they’re an investor, not even Andrew.

We would describe an investor as someone looking for long term benefit.  And we don’t mean buying and holding Beanie Babies.  If you love Beanie Babies, great.  Buy all you can afford.  But don’t expect to sell them one day to fund your retirement.  We mean stuff like the stock market or rental property.

An investor also doesn’t check the numbers every day and panic at the smallest hiccup.  Buy and hold.  This extends to areas other than money.  A person with an investor’s mind is always looking to the long term and not strictly what feels good at the moment.  It’s like the old marshmallow experiment.

Small children were given one marshmallow.  They were told if they waited to eat it until the tester returned to the room, a wait of about fifteen minutes, they could have a second marshmallow.  The children who waited were found to have better results later in life in terms of things like BMI, SAT scores, and educational attainment.  Wait for the second marshmallow!

Not all of us were born with the ability to wait for the second marshmallow but we can all train ourselves to be patient to reap the long term benefits.  What happens in the next year to the money you invest now doesn’t matter.  It’s what happens to that money years in the future.

Show Notes

Schneider Weisse Aventinus:  A wheat dopplebock.

Betterment:  Start getting into the investor mind set today.

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7 responses to “Exploring the Investor Money Mindset”

  1. Kyith says:

    You guys are rather big on Vanguard, and betterment or rather passive investing. What is the biggest maintenance effort for this kind of investing? Investor Psychology. Perhaps you can discuss how prepared are you to stop your brain from screwing with you when you see the majority of your networth go down 60%

    • Kyith, that’s a great point and an awesome idea. I think I’m going to have to take you up on that. Expect something on that soon!

    • jb1907 says:

      If your net worth goes down 60% you need to see what you are invested in. When the market goes down your thinking should be to buy shares because they are on sale. The market has never been down over a 10 year period. If you are young, just understand the market goes up and down. Even in 2008-2009 the market was only down 38%, not 60%.

      • So I’m a hard core data guy – it’s how I make my living. The biggest thing I learned with LMM is that the cold hard numbers that guide me don’t necessarily do it for most people.

        Everything you said is absolutely right but I think the question is more around the mental approach. For me, a large part of it is “investor amnesia” in that after I make a decision and invest I move on to the next thing and basically forget about the investment I just made. Helps me focus on looking forward instead of constantly backwards.

        • jb1907 says:

          You have to have investor amnesia. If you have stocks and you sell and then the stock doubles, you hate yourself for selling and if you buy and the stock goes down, you hate yourself. I bought Berk-B at 72 just to go to the BH meeting. Sold it for about 85 a few years later and now it is over 100, or it was last time I looked. I should have just held on to it. I am sort of lucky that my wifes job keeps me from owning stocks that her firm audits. I just stick to Vanguard funds and just buy. I don’t sell so I don’t have to worry about any of that.

      • Kyith says:

        I am more concern about the psychological aspect of a person. It is easy to say we should be buying. But that is logic not what people are feeling. Different people will have a different response system .some people check prices or look at their portfolio more frequently then us.when you do it that often ,in a down market, you will feel like reliving a nightmare or in a torture chamber will do stupid things .

        You cannot say that when the time comes u will do what you say. I don’t even there to say that for myself. That’s psychology. Humans are set up to have a problem in this area, can we have a script to frame the brain better. If we are talking about vanguard and betterment, your job is to ignore and be passive.what becomes most important is your education to focus intently on what matters and get educated how best to block out what doesn’t.

        You are right to say that in us its not 60% but in my part of the world we see a 60% fall. But its risky to use that as that is just one sample.our brain is restricting us by having recency bias there haha

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