by Shelley Seagler
Here’s an obvious concept: if you want to change something in your life, change your behavior. Certainly, there is nothing revolutionary or particularly profound about that idea, but for something so blatant, it sure is hard to do.
Don’t believe me? Read Alan Deutschman’s, Change or Die. Deutschman states that in situations where someone will surely face death if they don’t immediately change their behavior, the odds are 9-to-1 that they won’t change. 9-to-1…
So why, even in the face of death, is it darn near impossible for us to change? One reason is that bad behavior is addictive. Think about smoking or over-eating. What about gambling? Imagine walking through a casino. You’ll inevitably see some lady sitting at a slot machine, holding a cup of tokens. You go out and have some fun. When you come back four hours later, she’s still at the same machine, cup in hand, not one token fuller. You shake your head in judgment and wonder why the heck she just won’t give up.
If you’ve ever trained a dog, you may know exactly why she is so persistent. The best way to train a dog is to use intermittent variable reinforcement. With this strategy, you don’t give your dog a treat every time he exhibits the desired behavior. Instead, you give him a treat every third time, or fifth time he does it. The pattern doesn’t matter – what matters is that the dog learns that if he does the behavior enough, he’ll eventually get a treat. So he keeps doing what you want him to do. If you train a dog using this technique, it is virtually impossible to break the behavior.
Your brain actually works the same way. Imagine that it’s your turn at the slot machine. You excitedly pull the handle or push the button and you………lose. You do it again and again you lose, and lose, and lose. And just when you want to give up, you win! The machine goes crazy. Lights flash, buzzers buzz, and the sound of money pouring from the machine rings joyously in your ears. Suddenly, dopamine rushes through your system, causing total euphoria and you’re hooked. You keep playing the game. You lose often, but you know if you play enough, you will inevitably win again. Now, you’re so desperate to feel the rush that you don’t care how much you spend.
Unfortunately, when we look at the behavior of investors, all too often it’s not that different. Even for those who are trying frantically to avoid the lows rather than chase the highs, behavioral choices can wreak havoc on investment outcomes. Many studies, including DALBAR’S Quantitative Analysis of Investor Behavior (QAIB), evaluate the impact of behavior. The most recent QAIB finds that in the 20-year period ending in 2012, the average equity investor underperformed the market by a margin of almost 4%. Moreover, DALBAR’s research finds that 45% to 55% of this shortfall is caused by psychological factors.
What would your investments look like if you were willing to change the way you did things?
Listen, I get it. Change is hard. It’s also scary. Over the past 7.5 years, I’ve met every single person who has taken one of our live Snider Investment Method workshops. And with very few exceptions, I know that I am meeting someone who has made a deliberate decision to change their financial future.
Sure, a lot of people walk in with confidence and excitement. But I am well-aware that oftentimes, there is a certain level of discomfort, ranging anywhere from mild anxiety to near-panic. People worry about logistics – where they will sit, park, and eat. They obviously worry about who we are and what are they getting into. But for many, the biggest concern comes from self-doubt. They worry, “Is it too late for me to learn something new? Am I smart enough? Will I really be able to do this?”
To these people, I can say with full certainty – yes, you can do it. First, as our Snider Method instructor, my goal is not to sell you on something. I stay focused on making sure you feel comfortable and are understanding what the heck I’m talking about.
Second, the Snider Method was intentionally designed to help you manage your behavior. Based on our specific goals, we have created a systematic, rule-based strategy that eliminates any guesswork and allows you to keep your fear and greed at bay.
Third, Snider Advisors offers ongoing support for a mere $10 a month! If you are ever unsure about what you’re doing, you can call or email us. Our goal is to help you stay on track and feel absolutely comfortable using the Snider Method.
Furthermore, if you feel like you really can’t do it, you can get your money back. You have 90 days after the workshop (or online course) to ask for a full refund. Simply return your course materials to us, and will refund your course fee.
When it comes to improving your investment outcomes, there’s no doubt that changing your behavior is powerful. You just have to be willing to try. You have to make the decision that your financial future is more important than whatever it is – your fear, greed, apathy, etc. – that is keeping you from changing your behavior.