Seven Ways to Fool Yourself

By Maureen Crimmins on June 16, 2014 in Behavioral Factors in Investing

There are many ways that we like to fool ourselves, generally as an act of self-perseverance. Sometimes it is just easier to believe those things that we choose to while ignoring those things that we rather not deal with. It is kind of like the elephant in the room…you know it’s there but it is easier to ignore and walk around it. Spoken from someone who actually believes that the Mets will win a championship every year come April!

The philosopher Ludwig Wittgenstein once said that nothing is as difficult for people as not deceiving themselves. But while most self-delusions are relatively costless, those relating to investments can come with a hefty price tag.

There are a number of reasons that we delude ourselves, but one main reason is the need to protect our own egos. We would rather believe what we choose to believe and dismiss the facts that are evident.

Jim Parker of Dimensional Fund Advisors has written an article about the delusions that are evident among many investors every day and are often encouraged by the media. These delusions can be quite harmful in planning for your future.

To read Jim’s full article which includes the seven most common ways that investors try to fool themselves, click here: Jim Parker – “Seven Ways to Fool Yourself“

Overcoming self-deception in investing is not impossible. It just starts with recognizing that, as humans, we are not wired for disciplined investing. We will always find one way or another of rationalizing an emotional reaction to market events.

As Jim states in the article,

“But that’s why even experienced investors engage advisors who know them, and who understand their circumstances, risk appetites, and long-term goals. The role of that advisor is to listen to and acknowledge our very human fears, while keeping us in the plans we committed to at our most lucid and logical.”

So, you don’t need to be alone in planning for your future. Contact a financial advisor to help you stick with your plan. We are here to help.

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.