Michael Batnick wrote a fantastic piece on cognitive bias and how ‘beginning with the end in mind’ is a mistake when starting a stock position — to never begin with the end in mind. It’s hard to argue with him about that, because he’s right.
On a deeper level though, beginning with the end in mind, a phrase coined by Dr. Stephen R. Covey in his book 7 Habits of Highly Effective People, would probably have had you avoid trading the stock altogether — because you would’ve begun with the end in mind. I’ll explain…
Assuming you are a practitioner of good investing habits, you would (hopefully, probably) know that trading your way to fame and fortune is possible, but not likely — and fleeting either way. And beginning with this end in mind, you’d likely avoid focusing on this ‘trading stocks to get rich’ behavior altogether.
Don’t get me wrong. I own Amazon and Google and Apple… and a couple of other stocks, but the large majority of my money is in index funds, because beginning with my end in mind I’ve decided to spend most of my time focusing on the things I can control — where I spend my money, how I spend my time, and saving both time and money as much as I can.
One exercise Covey uses to fortify the idea of ‘beginning with the end in mind’ is to write your epitaph. Yeah, that end.
So, what do you want to be when you grow up? That question may appear a little trite, but think about it for a moment. Are you–right now–who you want to be, what you dreamed you’d be, doing what you always wanted to do? Be honest. Sometimes people find themselves achieving victories that are empty–successes that have come at the expense of things that were far more valuable to them. If your ladder is not leaning against the right wall, every step you take gets you to the wrong place faster.
And in that exercise, at least for me, “world-class trader” would not be one of the top ten things that would be on my “I’m dead” list.
Maybe it would be for you; I’m not judging.
Beginning with the end in mind, my list would read something like… loving father and husband, a loyal and caring friend, leaving the world a better place. Heck, if mensch was on the list I could die happy now… you get the idea.
Now, would financially independent be on that list? Probably, because I want to leave the world a better place, and that includes taking care of my family emotionally — and financially. But to me, spending all of my free-time trying to find a trading edge isn’t time well spent compared to my other life goals. Trading my brains out in today’s world just isn’t a good return on investment in my life. Maybe it is for you.
So, I guess what I’m saying is ‘rarely is there a never’ but beginning with the end in mind — your end — is probably a great place to start in figuring out where and how you want to spend your time in everything… including investing.