I won’t bother asking you if you are guilty of today’s topic, because we have all made this mistake at least once or twice. What mistake is that? It’s the trap of thinking too far ahead and doing so for the wrong reasons.
It looks something like this.
If Bitcoin hits $200,000, I can make the down payment on my dream home.
If Ethereum hits $10,000, I can retire.
One more profitable leveraged long and my kids can go to college.
One good month of trading and I can erase my debt.
Your version might be slightly different, but we are all basically telling the same story. This thinking starts in an honest place. We do proper due diligence, build conviction, develop a thesis, make a prediction and then act. This mistake creeps up on us as the profit rolls in, and is really hard to ignore.
It’s human nature. We want the best for ourselves and others and are naturally hopeful. But hope is not an investing strategy.
We also fall into this trap because we work hard to derive a thesis or prediction and our brains naturally want to reward us for doing so. If the original idea looks and sounds good, but still isn’t working, we will find a way to justify our decisions and be “right,” staying in a bad investment long past our planned exit.
The next time you fall into this trap, I challenge you to replace the above statements with one of the positive affirmations below.
If I continue to carefully invest, markets will reward me because they trend up.
If I expand my time horizon, I increase my odds of long-term success.
One good month of harder studying and I can sharpen my trading skills.
Win or lose on this trade, I will learn from what went right and wrong.
Thinking positively about the process and not the results and on a longer time frame will breed success. Having this mindset helps reset your thinking to square one, reminding you why you are here in the first place. Rather than wandering into a fantasy land of what could be, you will find yourself revisiting your old thesis, sharpening your skills, questioning your biases, and formulating better ideas. Hopes and dreams are removed from the picture, alongside boats, cars and lavish vacations.
That’s not why you are here.
Assume better habits and focus on what’s important, and you will find far more success as an investor.
The yacht can wait.