The shortest distance between two points is a straight line. I remember being taught this basic concept in geometry class. This is an accurate statement from a mathematical standpoint when you have a flat surface.
As we all know, life is not a mathematical equation or a flat surface. So, when we create expectations about reaching our financial goals in a linear fashion, we set ourselves up for disappointment.
In addition, a linear mindset can cause us to become overly optimistic or pessimistic. When things are going well, it can be tempting to think this string of good fortune is due to our genius decision making and that it is going to continue indefinitely. Of course, the opposite is also true. When things are not going as we expected, we can quickly believe that we are doomed to fail and life as we knew it is over.
From my observations, life is more circular than flat. For starters we have 24-hour days, four seasons a year, and every 365 days the earth makes a complete trip around the sun. So, when it comes to creating expectations for financial goals, perhaps we should have a cyclical mindset.
A cyclical mindset realizes that a period of rainy days is likely followed by some sunny ones. Yes, a rainy day can keep us from enjoying an outdoor picnic, but without the rain we wouldn’t be able to fully appreciate the sun. Cyclical thinking helps us keep realistic expectations and puts us in a better mental state to seize the opportunities in front of us. Equipped with a cyclical mindset, our rational brain knows that we are not on a straight-line path to our financial goals, and we can inform our emotional brain to look for opportunities instead of becoming panicked or impulsively aggressive.
Yes, our investment portfolios have seen some rainy weather over the last several months, but the team at Master’s would encourage you to use a cyclical mindset and position yourself well for when the sun begins to shine on the investment markets again.
When have you experienced the benefits of a cyclical mindset?