Weekend Reading: The Market Has No Memory. Should We?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading decumulation and spending complexities in retirement Weekend reading decumulation and spending complexities in retirement
Weekend Reading

While learning from your past investment mistakes should certainly teach you lessons, they also shouldn’t prevent you from making sound investment decisions today.


The power of past experiences: It’s inevitable, those who have negative memories of bear markets past might experience some form of fear in the midst of market volatility; however, as author Frederik Gieschen mentions here, what if “backing away from the loss” also allows you to remove investment distractions, which help you focus better on what’s happening today? Ray Dalio says, “Pain plus reflection equals progress”, but spending too much time reflecting can also lead you into a cycle of self-doubt.

The mentality of remembering: Research shows that those who suffer from severely deficient autobiographical memory (SDAM, or, those who cannot vividly recall certain events), can better leverage tasks that require abstract thinking (AKA, investing). On the other hand, individuals with highly superior autobiographical memory (HSAM, or, those who have a keen memory), can become overwhelmed with abstract thinking. They have an increased tendency to obsess over the past, which might cause them to feel mentally trapped in the present.

Focus Forward: Past experiences certainly make us wiser; however, holding too tightly to memories might deplete our ability to move forward. If you find that all you want to talk about is yesterday, it’s most likely not the past holding you back, but the present you that won’t let it go.