🧠 1 Simple Trick to Making Better Investing Decisions
Friends,
In 2017, Alex Honnold scaled the 3,000-foot sheer cliff in Yosemite known as El Capitan with no ropes. One mistake would had lead to a painful death.
A movie called Free Solo documented Honnold’s risky ascent. The climb is widely considered to be one of the greatest mental and physical feats by a human…ever.
While we are in awe of Honnold’s breathtaking climb, we disagree that it was his greatest mental feat ever.
Instead, we think that happened in the late fall of 2016.
With thousands of dollars on the line and a film crew waiting, Honnold made his first attempt at free soloing El Capitan. Part way up, he didn’t feel up to the challenge, so he called it quits.
That might seem like an easy choice now, but put yourself in his shoes in that moment. With adrenaline pumping, high expectations, and a documentary crew counting on him — the pressure to continue must have been immense.
But, he called it off anyway. And that decision surely saved his life.
We think that was his true greatest mental feat.
Honnold had a secret weapon that helped him make that gut-wrenching decision. It’s what author Annie Duke calls “kill criteria”: predetermined factors that would automatically lead to a concrete decision.
The idea of “kill criteria” is valuable in investing as well.
Before making an investment, decide what types of events would cause you to sell. List at least three.
Doing this beforehand is crucial. Your thinking will be much clearer. Studies show that if you get evidence you’ve made a bad decision, you’ll double-down on that bad decision moving forward. That can wreck you financially.
Kill criteria are one of the most effective ways to get out of a bad situation. You let yourself off the hook and live to fight (financially) another day.
Over the long run, few things are more important than that.
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Wishing you and your loves ones a wonderful holiday!
– Brian Feroldi, Brian Stoffel & Brian Withers
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One Piece of Timeless Content:
“It’s different this time.” As investors, we’ve been told to ignore that advice.
But every once in a while, there’s an argument to be had that things have changed. Howard Marks, co-Chairman of Oaktree Capital, penned a recent blog titled Sea Change. He explains why stocks may be in for a rough ride ahead and bonds are starting to become attractive.
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We love Warren Buffet’s wisdom on investing and life. We love it even more when someone crams 50 of the Oracle of Omaha’s insights into an easy-to-read thread. @Vivek_Investor has done just that.
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Sahil Bloom has become one of my favorite creators. He shares beautiful Twitter threads on how to live a healthy, wealthy, and fulfilling life. His newsletter The Curiosity Chronicle explores the topics of his popular threads topics in more detail. Best of all, it’s free.
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