Life’s Investment Lessons: Getting Stuck in the Past and How to Get Out

With both our lives and our money, it’s easy to get “stuck in the past.” We all share the experience of being hurt, betrayed or disappointed in a relationship with someone we care about. The emotional pain can keep us trapped in regret and mistrust. The same emotional pain can occur with our investment decisions when performance does not match our expectations. These negative past emotions prevent us from making good decisions in the present.

I clearly recall the switch in investor sentiment before and after the 1987 stock market crash. In October 1987, the stock market dropped 20 percent in two weeks. Prior to the crash, investors smirked at accepting a 6 percent annual rate of return in a money market account because, based on the recent past, they expected to make 20 percent or more in the stock market. After the crash, this sentiment quickly changed to regret and a mistrust of equities. I frequently heard clients say, “I’ll never invest in stocks again.” As a result of being stuck in the past, they missed the great bull market of the 1990s.

This effect can be felt in our personal lives, too. In 1981, I proposed marriage to a beautiful woman whose past included two failed marriages. If she had remained stuck in the past, we would not have celebrated our 35th wedding anniversary in March. We would have missed the joys of marriage and having a family. We now look forward to the continuation of our lifelong companionship.

Just four words can release us and our money from the negative emotions of the past and open us to the possibility of making good present-moment decisions in the here and now. These words are: “So what. Now what?”

Consider, for example, the following situations:

1. A January 2016 headline in U.S. News & World Report read: “Never before has Wall Street gotten off to a worse start to a year.” So what. Now what?

2. “If I wasn’t hooked on overeating carbs, I wouldn’t be 10 pounds overweight.” So what. Now what?

3. “My best friend forgot to wish me happy birthday. I’m disappointed and mad.” So what. Now what?

Regarding the first situation, now what? Remind yourself: Stocks are on sale. My goals are long term. I’ll check my asset allocation to see if this is an opportunity to buy stocks to rebalance my portfolio.

And in the second circumstance, now what? Perhaps commit to yourself: I am going to buy a Fitbit and set a daily goal to average 10,000 steps. If I miss the goal, I won’t eat carbs the following day.

Finally, about that last situation, now what? Maybe simply tell yourself: I need to convey to my friend that birthdays are important for me and I missed not hearing from them because they are such a special part of my life.

Saying “So what” dismisses the grip that past emotions have on our ability to make good current decisions. Asking “Now what?” allows you to investigate and pursue actions that you can take in the present to immunize yourself from making poor decisions based on past emotions.

So what. Now what? Try it.

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