Hi guys,
I consider myself a fairly logic, rational and data driven person. Usually, before making any decision (especially re:money), I use my trusty spreadsheets and make the best decision based on the data available to me. Anyways, I recently decided to change my portfolio asset allocation. I won't go into detail about my specific investments as that's not the point. The point is that I made a conscious decision to change my AA based on changed circumstances in my life and it looks like the right decision based on my specific situation. (that's what my spreadsheet tells me anyway)
So here I am, logging into my brokerage account, getting ready to make the change. But then..... I look at my current holdings and see that the position I am adamant to sell is an overall loser. I say to myself, if I sell now, I will have lost money. So the discussion in my head begins:
Rational investor: I will sell that position because I have analysed the fund and it does not make sense to have it in my portfolio. I made the analysis, the data says I should change my AA!
Irrational dumbass investor: Maaaaaaaaan.....if you sell now, you lose like a shit load of cash. Imagine what you could buy with THAT!
Rational investor: Yes, but the data says that staying this course isn't the best way forward. The fact that the position happens to have recently lost a bit doesn't change this fact in the long-run. I have it here in my spreadsheet, look!
Irrational dumbass investor: the spreadsheet, the data..... bla bla....are you with NASA? You sell, you lose. you wanna lose money????
Rational investor: you have a point....
Irrational dumbass investor: fucking right, I have a point. You are in this to win not to lose, right?
Rational investor: so what do you suggest?
Irrational dumbass investor: easy, just wait until you are break even and THEN you can sell. I got your back man!
Rational investor: well....
Irrational dumbass investor: the time's ticking. Oh look it just lost another 0.01% while you were talking to me. Now you should REALLY not sell
Rational investor: has left the conversation
Irrational dumbass investor: Excellent!
Ever had this case of irrational taking over the rational? I just did!