King Solomon always tells us in his Proverbs that wisdom and prudence are the keys to a successful life – and that’s a sentiment that’s reflected in Jason Hartman’s Next 10 Commandments for Investors, a new set of investing recommendations that follow the key points made in the original set of 10 Commandments for Successful Investing.
Commandments 14 and 15 in Jason Hartman’s new set point up the importance of thinking ahead and working toward a long-term vision. “Thou shalt make rational decisions, “ says the fourteenth Commandment, reminding investors to be wary of impulse decisions that grab the heart, not the head. Keeping a cool head and refusing to be swayed by impulse can prevent a lot of regret later on. And, “Thou shalt look at the big picture,” says Commandment 15, reminding investors to think in terms of long-range goals and create strategies to make them a reality.
These two recommendations go hand in hand with the advice of the first ten, which advise investors to educate themselves about investing and keep control of their investing efforts. But there’s a saboteur waiting in the wings, ready to derail the best efforts to put the commandments into action: stress.
A new study on the effects of stress on investors examines the way both chronic and short term tension can affect the brain’s ability to process information, adapt to new situations and, yes, make clear decisions and plan for long term goals. Brain chemicals released as part of the stress response can actually inhibit that kind of thinking, researchers learned – by boosting short term thinking power, increasing attention to the present moment rather than the future, and damping down the ability to reflect on events.
And it’s those abilities – to see the forest, not just the trees, and to detach from impulses in the present to make thoughtful decisions based on facts, good advice and logic – that create the foundation for building wealth. Successful investors look toward the future with a plan in mind and a clear vision of the steps needed to get there and those steps guide the decisions they make.
But if you’re under stress, your ability to do that is impaired, which paves the way for impulse buying and limited thinking. When the brain is flooded with stress chemicals like cortisol and adrenaline, we lose perspective and the capacity for weighing options is impaired, so it’s more tempting to grab the first option that comes along. We focus only on what has to be taken care of immediately, so it’s difficult to slow down and take stock of better options.
It’s important for everybody to manage stress – but for investors, reducing stress makes it easier to build wealth by following King’s Solomon’s advice to be prudent, along with Jason Hartman’s Commandments for building wealth through income property. (Top image:: Flickr/ankaka)
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The Solomon Success Team