Why Most Americans Continue Along a Self Destructive Course Towards Financial Disaster

By James E. Wilson via Iris.xyz

The reason most Americans continue along a self destructive course towards financial disaster has nothing to do with investment returns.

Yes, returns matter but they pale in comparison to what you believe, your internal operating system that determines how you actually save, (or even if you save), and invest. These beliefs ultimately impact the choices you make and how well, (or how poorly), you stick to these decisions.

Based on thousands of observations over the past thirty years, I have coined what I call The Belief-Reactivity Hypothesis. The primary tenant of this hypothesis is that the stronger the belief, the more likely there will be a strong reaction at an inopportune time. For instance, someone who believes that the stock market is priced too high, will be ultra sensitive to stock market changes and will likely jump out of the market with normal short term volatility. This folds over into missing longer term market movements, which of course usually means lower returns. This vicious cycle repeats itself over and over. Financial goals are achieved through intentional action, not reaction.

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