Investing Pitfalls - The Pursuit of Perfection
Posted by John Posey
One pitfall of investing I’ve noticed over the years is the pursuit of perfection when it comes to selecting investments. Because this is such an important perspective, I’ve highlighted this in other articles like The Stock Market Doesn’t Care How Hard You Try, and my work in the Financial Freedom Field Guide. Perfection is an alluring feeling that tends to run on replay in a lot of investors’ minds making us think that just maybe we should be consistently tweaking things in pursuit of that precise combination of the “right” investments. What I’ve discovered is that it is much more useful to try to be a little less wrong tomorrow than precisely correct today for no other reason than we cannot know with any precision or consistency what the “best” investment is at any given moment.
Carl Richards, Certified Financial Planner and author, wrote a nice piece on this topic in his newsletter. Here is my favorite excerpt from the article:
The markets themselves are a reflection of our humanity and how we feel at any given moment. Unemployment goes down. Great! The market goes up. A few days later, the housing report shows a drop in sales over the previous year. Bummer. The market goes down.
Where’s that perfect investment now?
Perfection as a financial goal is impossible to achieve. There are so many variables at play that it becomes a bit like a game of Whac-A-Mole. Where will the next problem pop up?
What if, instead of chasing perfection, we went looking for something a little simpler? What if we focus on finding financial options that meet most of our wants and still leave us time and energy to do things we enjoy?
It comes down to making the most of any particular situation and not beating ourselves up over the things we can’t control.
And by the way, that advice doesn’t just apply to investing.
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