In my last post, I spoke about the first psychological component for long term success.
The 2nd psychological component to a good investment strategy is that for every four good investment periods, there should be only one bad investment period.
The idea is inspired by The Power of Bad by John Tierney and Roy Baumeister.
The central thesis of the book is that anything negative about an experience will, generally speaking, tar the overall experience so badly that a significant number of positives will not be able to balance it out.
This plays out very much in modern marriages.
Psychologists who observe married couples found that the marriages that tend to last have 4 pleasant interactions to 1 bad interaction. Consequently, marriages that have less than 2 pleasant interactions to 1 bad interaction tend to result in divorce.
We can use this “4 Good to 1 Bad” rule of thumb to design an investment strategy for beginners. An...