Do You REALLY Know How You Would React if the Stock Market Dropped by 20%?

Fort Worth Stockyards Cattle Drive by Fort Worth Financial Advisor Hull Financial Planning

Part of the herd?

“What is necessary to change a person is to change his awareness of himself.”
–Abraham Maslow

“The final mystery is oneself.”
–Oscar Wilde

If you’ve ever taken one of those online financial assessments, you’ll know that you’re asked questions about yourself. Most of them are either demographic – how old are you, are you married, etc. – or they’re financial – how much do you earn, how much do you have invested, when do you want to retire, etc. However, there are a couple of questions that are designed, supposedly, to help you measure your risk tolerance.

How would you perceive a 20% drop in the stock market?

or

I like for my portfolio to be aggressive/conservative/random choices.

All of these questions are designed to help an advisor determine just what sort of asset allocation you should have. If you’re risk averse and would run for the hills at the first sign of a downturn, then you should have a more conservative portfolio. If you’re risk-seeking and liken your portfolio to the thrills you get from jumping off of the Stratosphere in Las Vegas, then you may want to invest in all penny stocks (I am not recommending this course of action, for the record).

These risk questionnaires make two fallacious assumptions about your own knowledge of and mastery over Monkey Brain, what I call your limbic system.

  1. You know thyself as well as you think that you know thyself, and
  2. You should adjust your investments for your own behavioral biases rather than for time-tested quantitative reasons.

In this article, we’ll see why both are fallacious assumptions.

The Hot-Cold Empathy Gap Does Not Mean That Your Head is in the Oven and Your Feet Are in the Freezer

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Thank You

Life’s easy button?

“Gratitude is the healthiest of all human emotions. The more you express gratitude for what you have, the more likely you will have even more to express gratitude for.”
–Zig Ziglar

James Altucher has had ups and downs in his life.

The founder of StockTwits has been a millionaire before. Then he lost everything. Then he gained it back.

He’s not your prototypical success story. He’s not even your prototypical “average person” story.

After all, there aren’t that many people who have been millionaires, much less lost it all, and then made it all back.

In his book Choose Yourself, he describes what he felt like when he had hit bottom – having lost his fortune and seriously considering whether killing himself because of his $4 million life insurance policy.

At that point, he decided that he needed to live in the present.

He calls thinking too much about the past or the future time travel. When you time travel, you either worry over things that you can no longer change – the past – or about things that may not work out the way that you expect them to – the future.

But, at his nadir, he was having trouble focusing on the present. He was having trouble doing anything except feel sorry for himself and question his worth to society.

So, he started expressing gratitude. Two of the twenty-six items in his “daily practice” involve expressing gratitude. He later advises a reader who has eight days to make rent to start the day by listing out things to be thankful for and telling friends how thankful he is to have them in his life.

Altucher advises living in a state of gratitude and not time traveling. But, does being grateful now and living in the present help you in the future?

According to Harvard’s Jennifer Lerner and her team, the answer is yes.

How Gratitude Now Makes the Future More Important

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