Force for thought — 11.10.24
To Have and To Hold
How do you hold onto a good thing and not let it go before it has time to work its magic? By mobilising a method that works. No one is insulated from the challenges of sticking with something promising — not a diet, nor an exercise regimen, or even a first date — the moment it becomes uncomfortable and hard. Why should investing be any different?
We’ve collected more than four million data points that demonstrate how a particular methodological communication enables investors to hold on for the ride. The proof stretches beyond investing: our ability to hold on when we least want to — in order to withstand things that can cause our undoing — has application everywhere. Each week, we’ll show how and why a mechanism for holding on, in investing and in life, is so powerful.
Zooming in
In a short story, written by American writer Frank Stockton, we are told an unsettling tale of chance. The condensed version is this: an unconventional king trials men for their crimes in a peculiar way to please himself; rather than place punishment or innocence in his own hands, men are confronted with two doors and must choose one to walk through in order to decide their fate. Ahead of them are two extremes: a beautiful, eligible woman who they must marry or a tiger. It follows that when the king learns of his beloved daughter’s affair with an unfit suitor, the man is subject to the same set of circumstances. In the meantime, his forbidden lover agonises over the man’s fate; either he will be ravished by another woman or eaten alive. Consumed by these thoughts, the king’s daughter undertakes to find out what lies behind each door, and when she does, gestures a direction to her unfit suitor at this decisive moment in his life. Then, he opens one of the doors and the story ends, leaving readers to sit in their uncertainty. Did the tiger come out of the door, or the lady?
What can we learn from this unnerving ending? Even if the tale unfolds in a fictional kingdom, it is nevertheless instructive for our investor journeys, where information vacuums can derail us at any time. So, how do we live alongside uncertainty without veering off path? Given all of us, like the king’s daughter, are vulnerable to heightened emotions, we need to implement productive, proactive and recurring reinforcement — like Force500’s feedback system — to keep us on track. Without this system, we remain like the readers of the tale: uncomfortable, unsure of ourselves and unable to script a favourable outcome for our investments amid changing information. Like the fates of the men on trial in the king’s arena, the stock market is fraught with uncertainty, but by curating the information we focus on, we can also dial down the noise.
To Have on Hand
“The best way to improve at managing emotions is to do more reps.” Emotional regulation takes daily practice, says Adam Grant, organisational psychologist at the Wharton School of the University of Pennsylvania and podcast host of ReThinking. History shows us the average holding period of the S&P500 is only four to six months, with investors typically exiting at a loss. Why? More often than not, it is due to an emotional shortcoming; an ill-timed and fleeting change in feeling. The antidote? Per Warren Buffett, Charlie Munger and even Grant, it is a durable and stable temperament — and fortunately, unlike luck or genius, that can be honed.