“Life is really simple, but we insist on making it complicated.”
A Great Read
Our team here at Concentus recently discovered a great article from Farnam Street that we all really loved, and we hope you will enjoy: “Complexity Bias: Why We Prefer Complicated to Simple.”
The article is somewhat lengthy, but it’s worth a read. In essence, it explores the human cognitive bias known as “complexity bias,” a hardwired human tendency to “give undue credence to complex concepts.” The article discusses two primary implications of complexity bias that I found quite interesting and that are particularly useful to understand in relation to investing and wealth planning.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
– Peter Lynch, legendary investor
The “Inevitable” Correction
Last week I had a meeting with a new prospective client that got me thinking. This gentleman recently sold his company, and had the good fortune of receiving a multi-million dollar payday, so we were meeting to discuss his financial and investment planning. We discussed the merits of investing his capital in the equity market, and he agreed heartily that ownership of a portfolio of great companies would be the best way for him to sustain his income, and maintain his wealth, over the next 30 years of his retirement. However, he had only one condition for the implementation of his investment plan: He wanted to hold off on investing his cash into the equity market until stock prices pull back, because, after all, “a major crash is inevitable.”