1/“Your investing ability is unproven until it’s survived a calamity."
~@morganhousel
~@morganhousel
2/Morgan makes an excellent point. I believe there is currently really no way to “simulate” a bear market. Maybe at some point in the future, VR will figure it out.
3/Your brain understands it’s not real and is an abstraction, and therefore no emotions are engaged.
4/Mikhail Gorbachev was asked about actions taken against his better judgment, he answered:
5/“Your question is academic because it is abstract. People don’t have the luxury of living in the abstract. They live in the real, emotional, full-blooded world of reality.”
6/That’s where investors live. No amount of reading, simulating, or theorizing how you will actually react to a real bear market will work.
7/Indeed, it could seriously mislead you into thinking that you will follow your plan during a bear market.
8/ History shows quite the opposite. When your emotions have you fully by the neck, all bravado exhibited in calmer times often evaporates.
9/ Your higher functioning brain turns off and your primal, “lizard” brain takes over. This normally reaches full effect at the worst possible time.
10/ So, don’t fool yourself, when “full-blooded emotions” are running the show, the results are often bloody indeed.
11/ If, despite all of these emotions, you manage to stay true to your investment plan, Congratulations, you’re well on your way to succeeding with your investments.
