How to Detach from Your Financial Wins and Losses

We never truly know whether an event is good or bad, whether it’s winning the lotto or a recession

Jacob Schroeder   Oct 14

Bear market, high interest rates and a looming recession. What a terrible time to invest, buy a home or start a business. Or, maybe it’s a great time to invest (cheaper stocks), buy a home (fewer competing buyers) or start a business (less market competition). Everything is terrible. Or, maybe everything is great.

Most financial decisions we make are in response to events – losing a job, winning the lotto, having a baby. Instinctually, we make a judgment about those events and then act; we celebrate the good and grieve the bad. But, what if we can’t really tell the good from the bad until much later – or even never?

With the firehose of bleak financial news intensifying our emotions lately, I thought it would be appropriate to talk about detachment.

Whenever I feel strongly about an event in my life, I try to retreat into the wisdom of my own ignorance. Because life has a way of proving our initial judgments wrong. I remind myself that I don’t truly know if an event is good or bad. Over time, those labels can change. What is once misfortune can be God’s gift, and vice versa.

For instance, my family moved just when I started high school. I thought it was one of the worst moments of my life. Not only was I the “new kid”, but also an extreme introvert. It wasn’t until my senior year that I made friends. Fast forward 20 years and those friendships count as some of my strongest relationships in life, a wonderful fortune that wouldn’t have happened if this seemingly major misfortune hadn’t occurred first.

Apple fired Steve Jobs, which motivated him to make the personal and professional changes that would lead to his greatest innovations and this profound realization:

“I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me.”

In 1915, copper miner Stephen Jenkin received one thing we all wish for when we travel: a free upgrade. His ocean liner ticket back to the U.S. was switched at the last minute to a new and more luxurious ship, which he told his family he was really looking forward to sailing on. The last time his family heard from him was via postcard sent during a brief stop before crossing the Atlantic. He wrote: “The Titanic is a lovely ship.”

I’d bet almost everyone has experienced some kind of “blessing in disguise” or the opposite, which we could call a “curse in disguise.” These moments only exist because our brains are wired to create quick assessments of events. Friend or foe. Good or bad. While that works in the wilderness, it’s less effective when trying to plan for the future.

There is no such thing as wins and losses

Outside of a charging grizzly bear or a man in a hockey mask brandishing a machete, we can’t definitively tell if something happening to us is a fortune or misfortune (though it’s possible these events could also lead to good fortune – a lucrative book deal, perhaps, if you’re not brutally murdered). At least, not until later (if ever) when we see the ultimate consequences of that event.

But our instinct is to categorize events as good or bad and then act on those flawed assumptions. Which can lead to costly mistakes. A classic financial example is an ongoing investment study that shows the average stock investor greatly underperforms the stock market.

The reason is chasing performance. A stock goes down, which we think is bad, so we sell it to buy the stock that is going up, which we think is good. Except this often results in poor returns. Like a game of whack-a-mole you’re trying to hit winning stocks when it’s already too late.

 The alternative?

To continue reading, please go to the original article here:

https://rootofall.substack.com/p/how-to-detach-from-your-financial