When you wake up what is the first thing you think about? When you go to sleep what is the primary thing you think about? When you lose your job what is the first thing you think about? As a survival mechanism the brain likes to play movies in our head about the future. Our imagination is amazing at making us feel the outcome of possibilities. This is what reading is all about, when we read symbols arranged in infinite number of combinations in a specific order create movies in our mind. These movies transfer our consciousness to the reality we create in our mind, good or bad.
I refer to this, phenomenon of reality creation in our minds because it can affect our decision making when investing. Even playing out our day impacts our emotional stability. Let’s play out a scenario. You lose your job, the gut wrench of overwhelming realities rush over you. What if I can’t find another one? What am I going to do about bills? What is my family going to think? Your brain quickly starts to answer these questions the best it can. Unfortunately, you put a filter on it, FEAR. Every outcome you’re going to create is going to have the worst case rushing through you brain. You see this in the market all the time. Therefore “corrections” go further than expected, and extremes happen. If the market is going in a favorable direction to the masses, they make a movie with the market going up forever and the good times always going to happen and continue to buy in far longer than rational. When this happens, the masses feel the future they paint in their mind. They continue to invest in their business and think that this city will always have demand for houses. Though they might be right, most likely not at the pace that is current. The news doesn’t help because they are just going to report on what the masses want since we like to watch and hear things that we agree with. I can’t stress to you how much this "when" is affecting your emotions, trading and life. When I started to realize "when" I was feeling along with what I am feeling, the perspective I gained for my decision making and trading was amazing.
I’m a visual guy so I’m going to turn this into a graph that better illustrates what we feel and "when" we feel. Since we perceive things in a linear time sense, meaning one event leads to another, It makes sense to look at it like a stock chart. Let’s imagine that your "when" is in the future at Point B and you are living in Point A. In a common situation most people are doing somethin
g simple like, on a Wednesday they have had a great week and are looking forward to a fantastic weekend. In the Markets or the Economy this is like recognizing how good it has been for the last few months or even a year and seeing how much your 401k is going to grow by the end of the year/ 5 years later. On the graph this is like using point C and then projecting to the point D. Now there is nothing wrong with this. The one thing to remember is that all the synthesized emotions of what it’s going to feel like being at point D you are going to feel at the present moment. You will feel the Excitement about having the conversation with your wife when you make that money, the things you can buy or the college tuition that you don’t have to worry about any more. We aren’t that good at this emotional synthetization though. I believe it’s because we feel all the feeling at once when projecting and not a drip feed like what happens in reality. Another way to look at it, we have felt all those feelings already, and the reality isn’t a surprise. Think about it like a gift. If you know what it is beforehand, are you as pump when receiving it? Now that I am describing this, I feel like I am taking the wind out of all the excitement for achieving anything in life. But this is how we are motivated. We drive toward outcomes that we idealize and over-amplify in our minds. With decisions pertaining to investing it’s helpful to keep this in mind so that you know the real expectations and if you are aligned with them. Not some kind of illusion of grandeur or worse some sort of apocalyptic fear far outside the realm of possibility. In fact, sometimes I have caught myself with the realization that the very thing I was fearing was already happening. So why fear it anymore? Then was the time to attack the situation and ask” What would it take”.
The second graph illiterates the same type of projection as the first and I put an emphasis on the range that you feel when your mind is in the future too far. Imagine feeling the entire range of the red area. This would make anyone go nuts after a while. Ever had the boss reminding you of a deadline while freaking out that you aren’t going to make it, but you always do? You can see that the emotional stability of keeping your mind closer to the present is much more efficient and accurate. From experience I can tell you, this is a much better way to live your days. You tend to enjoy the little things more and not let what “could be” control you. The present is the most powerful timeframe to be in. Maybe some of the old sayings past down for thousands of years has validity. One simple question of When is your mind, can bring everything into perspective and allow you to have a more productive emotional range. Try it next time you are angry, defeated, excited or playing out how the next week, month or year is going to be like.