Good patterns for 2021

January 15, 2021

To kick off the year, let's think of the very complex control board from the Chernobyl nuclear power plant: Who could have predicted something would go wrong?

That interface mistake was repeated at 3 Mile Island in the United States, though the management structure, as well as idiosyncrasies of reactor design, saved the U.S. plant from total meltdown.

Human beings do not respond well to infrequent events in complex systems. Human beings do well when something is practiced over and over, like a pilot touching down a 737, a surgeon reconstructing a hip joint, or a cabbie just missing a bicyclist.

When you think about your investment goals, don't aim for the infrequent event. Let other people try to find the next Bitcoin or other bubble. You don't need the stress if it turns into a tulip bulb crash. Betting on infrequent events makes for good news stories but generally poor investing.

Instead, aim to create patterns. Regular, monthly savings into investment accounts is a good pattern. Not watching the financial news is a good pattern. Not picking stocks is a good pattern. Not assuming the market is wrong - also a good pattern (the market may be, but don't default to that assumption). This will help keep you out of the financial equivalent of Soviet reactor #4.

We have a lot of exciting things in the hopper for clients this year. Combined with these behavioral patterns, we see a bright future. Stay tuned.

Dan Cunningham