Force for thought — 20.12.24

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

Let’s rewind to the 1930s. It was then that psychologist Clark Hull conducted an experiment that led to the development of the Goal Gradient Theory. Hull placed a rat and a food reward at opposite ends of a maze. His findings? The closer the rat got to its food reward, the faster it ran. The same is true of athletes: even though they are the most depleted at the end of a race, the closer they get to that finish line, the more energised they typically become. When a goal is within closer reach — or even when there is an illusion that it is within closer reach — we experience an uptick in effortful investment within that goal. For example? Studies have shown that customers who receive partially pre-punched coffee cards, to incentivise repurchase, use up their cards faster than customers whose coffee cards have to be filled from scratch. If we invert this logic, it makes sense why most individuals struggle to succeed with their investments. Their rewards simply feel too far away. When it takes years to realise a meaningful return — and the distance between us and our rewards grows greater — we have to operate at odds with our natural human behaviour.

So, what can we do about it? We can implement meaningful ways to hinge ourselves to our progress in the present. In investing, the magic of compounding is most effective in the outer years, i.e., the longer you wait. That’s why finding a way to survive the journey is essential. Successful investors need regular stopgaps — regular feedback — in order to remain even-keeled and subsequently to remain invested. That is the role of the Force500 feedback system: to optimise the investor pathway by keeping investors focused on their incremental progress which, similar to a muscle, must be routinely nurtured, practised and strengthened. Why? Because if progress isn’t front of mind, it will elude us.

To Have on Hand

A new study unveiling three quarters of the US population is overweight or obese is peculiarly instructive vis-à-vis the importance of developing a mechanism for holding on to our investments. How so? Even though our knowledge around obesity epidemics is greater than ever before — we know the concomitant risks of diabetes, heart disease and shortened life expectancy — ironically, we are suffering more than ever. Why? Because the fundamentals of creating wealth or losing weight (while nuanced) boil down to the same conundrum: even though we may know what to do (which stock to pick or diet to choose), the how is always harder — and it remains near-impossible to do it alone.