What should we get for Dinner? Raghu asked Rathi.
Chinese, Pizza, Lebanese, North Indian, Or South Indian?
After much deliberation and decision-making, they end up ordering from the usual restaurant or the one that brings food the fastest.
Decision-making has become more complex with the increase in the choice and data points.
According to researchers from Cornel University, people make about 220 daily decisions on food alone...
I also read many articles on the internet stating that an average adult unconsciously makes about 35,000 daily decisions.
It seems like a lot, and there is no credible source or research to corroborate this statement.
Nevertheless, you get the idea that we make quite a few decisions every day. Some big, some small. Some crucial and some inconsequential.
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Our decisions shape our present and the future.
They have a significant impact on our lives, especially when it comes to Health, Wealth, Career, Relationships, and Spirituality.
We must make as many good decisions as possible, mainly when dealing with crucial ones.
But then, we often make bad decisions, don't we?
So, how do you make good decisions promptly?
Let's see what James Clear - the author of the book Atomic Habits, has to say....
"It's hard to save poor early decisions with good late decisions. Certainly, things can be improved by making good decisions along the way, but the effects of poor early decisions tend to linger."
This is profound and took a while to sink into my mind.
The Domino Effect of Decisions
The following examples from James makes the idea clear.🤣(pun intended)
1. "It's hard to write a best-selling book if you chose an unpopular topic. 2. It's hard to make money in real estate if you overpaid at the beginning."
James also provides a simple solution to make good decisions, here is how it goes...
"One filter I use for making decisions: How much can I influence the outcome after the initial choice is made?
Consider of this filter as your guide to making crucial decisions.
Investing, without a doubt, involves decision-making, and the quality of your decisions determines whether you build wealth or lose money.
Sometimes, we freeze and default to indecision and inaction instead of seizing the opportunity.
We wait for the right time, opportunity, and suitable market conditions. Or we are afraid of making mistakes and losing money.
I am guilty of indecision and inaction and letting an opportunity to invest in a property in Dubai, pass by in October 2020, and prices have doubled since then🤦.
This will condition you to make good investment decisions over time.
The foundation of any successful investment strategy begins with setting clear financial goals.
They act as your guiding star, helping you make informed investment decisions aligned with your aspirations and financial situations.
A Holistic Financial Plan can help you determine your goals and objectives and build an action plan to achieve them. It also helps you determine wether you can influence the outcome if you make a wrong decision at the outset.
Investment decisions based on a robust financial plan are typically well-informed and are more likely to be correct right at the outset.
Your investment horizon is the time you expect to remain invested in a particular asset or plan.
Ideally, It should align with the goal for which you have created/held this investment. Determining your time horizon helps you decide on the type of investments and the strategy.
If your goal is due in the long term, you may opt for assets with a higher growth potential and volatility.
Investing in low-risk/growth assets for long-term goals could expose your money to inflation, and you may run the risk of not being able to achieve your goals.
Also, when investing for the long term, you can influence the outcome to a large extent. Hence, you can afford to take a certain amount of risk and make amendments if you make a wrong decision.
However, if your goal is due in the short term, your focus should be avoiding risk, preserving capital, and achieving stable growth.
So start as early as possible when investing for crucial goals. Give your money enough opportunity to benefit from the magic of compounding, and also give yourself the possibility of making amends if you make a bad investment decision.
We have heard it so often that it has become a cliche: "Do not put all your eggs in one basket."
Yet, people continue to invest a bulk or all of their savings in the most exciting asset of the season.
For Eg, in 2020 and 2021, it was Cryptocurrency, Tech Stocks, and Meme Stocks.
In 2007, it was real estate. People even went to the extent of borrowing beyond their means to invest in these assets.
Not diversifying your risk provides you little room for making amends when markets fall. So, avoiding the concentration of risk in one or a few assets is a good idea when investing for crucial life goals.
While investing aids growth and promotes economic activity, Trading is a zero-sum game, meaning you have to lose for someone to win and vice versa.
When you add leverage to trading, the profits can be multifold, and at the same time, you can lose all of your investment.
You are largely left at the mercy of the markets and have very little influence on the outcome, so avoiding trading with leverage is a good idea.
Finally, don't forget to review your investment portfolio regularly. An interval of at least every six months is advisable.
Life is dynamic, and your financial goals and circumstances may change. Markets could go up or down. A periodic review allows you to influence the outcome of your investment by realigning your investments with your change in circumstances and volatile markets.
In conclusion, every decision we make shapes our destiny in one way or another. Use James Clear's decision filter when making crucial life decisions.
Remember, decision-making is an art that improves over time. Finding a balance between informed analysis and action is crucial for success.
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