Self-Control and Self-Awareness in Investing
People often fail to accurately assess their own actions, whether in daily life or investing. A study at an Italian restaurant revealed that one-third of diners couldn’t recall how much bread they had eaten, while 12% outright denied eating any. Additionally, those with average body weight underestimated their intake by 20%, while overweight individuals underestimated by 30–50%. This highlights a fundamental human limitation in objectively perceiving our own behavior.
The same applies to investing.
In bear markets, investors feel it's too early to buy and too late to sell.
In bull markets, it feels too late to buy and too early to sell.
Holding too much cash leaves investors paralyzed, unsure of when to invest.
Large losses create confusion about when to cut losses.
Holding investments for too long can lead to Enron or Lehman Brothers-like collapses.
Why Investing Is Difficult
No one can predict the market with absolute certainty. Market tops and bottoms are impossible to time perfectly. If someone claims otherwise, they are either lucky or lying. So, what’s the solution?
Investors Should Think Like Security Guards
With more investment options than ever, filtering bad choices is crucial—just like a bouncer controlling entry at a club. Investors need to set clear criteria to eliminate distractions.
Musician Jack White called this “freedom through restriction”. To maintain creativity, his band The White Stripes set strict limitations:
No blues, no guitar solos, no slide guitar, no cover songs, and no bass.
This forced creativity, leading to some of the best albums of the 2000s.
The same principle applies to investing. Too many choices lead to confusion and wasted time. Defining clear investment rules and eliminating unnecessary decisions leads to better outcomes.
Make Decisions in Advance
Money triggers fear, greed, and stress, clouding judgment. That’s why investment rules must be set in advance, ensuring decisions aren’t driven by emotions.
Examples:
What’s your plan if the market crashes?
At what profit level will you sell a stock?
What percentage of your portfolio should be in cash, stocks, and bonds?
Focus on Process Over Outcome
Success in investing isn’t determined by short-term results but by following a consistent investment process.
The market appears like a scoreboard, but short-term performance is misleading.
Even the best investors make mistakes—nobody times the market perfectly.
The key is to trust a reliable investment framework and stick to it.
Set Up Guardrails
The simplest guardrail in investing is asset allocation.
If unsure when to invest cash, predefine stock, bond, and cash allocation targets.
If unsure when to buy or sell, set minimum and maximum position sizes.
Such rules reduce emotional decision-making and enable rational investing despite market volatility.
Restrictions Create Freedom
Today, a smartphone gives more communication power than a U.S. president had 25 years ago and more information than a president had 15 years ago. But more information isn’t always helpful—it increases the challenge of filtering out noise.
The same is true for investing. Chasing every opportunity is counterproductive. Instead, define clear investment areas and strategies, and ignore distractions.
Ultimately, investment success isn’t about market predictions—it’s about sticking to pre-established principles, avoiding emotional decisions, and maintaining a long-term perspective.
[Compliance Note]
All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.
The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.
Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
