The Motley Fool

It’s Time to Leave Old Ways of Thinking Behind

Investing is a progressive process involving many disciplines, but fortunately, our brains are equipped with numerous mental models in order to understand and make sense of the complex world around us. While it’s not always easy, the least investors should do is to ensure their brains don’t fall behind when it comes to new trends, information, and discoveries.

As humans, our brains work in a generally linear fashion, taking in and incorporating information by mixing it up with older, known information that has been stored deep within the recesses of our grey matter. This worked very well for our ancestors since they dealt with simple processes (e.g., hunt, forage, look for shelter) and did not face a lot of complexity in their lives. However, in the Internet age, where information is disseminated rapidly and businesses are disrupted quickly, it’s important to be able to train our brains to cope with the increased load.

A periodic software “update”

Our brain represents the “hardware” of thought, where information flows through and is filtered for both relevance and importance. The “software” that resides within this hardware is the operating system we run: a network of beliefs, ideas, and thoughts that determine our views and opinions and guide our actions.

Investors need to periodically update their systems so as to make use of the latest information and trends, similar to how our laptops and smartphones require updates in order to function optimally.

Antiquated ideas or beliefs

Discarding antiquated ideas and beliefs is important, as they may end up lingering in our minds and hold us back from making good investment decisions. Investors who stubbornly hold on to outdated ideas end up with flawed investment theses, which are very dangerous since they imbue the investor with a false sense of security. Some may also hold on to old ideas as they refuse to move on and accept that they’ve made an error — a product of misplaced pride and ego.

Refreshing our theses

A savvy and astute investor is able to continually refresh his investment thesis by incorporating new information into his thought process. This is an example of an iterative cycle, and it helps the investor grow and mature over time. No thesis should remain static since the world around us changes constantly, and companies evolve over time, too.

The Foolish takeaway

Investors should regularly conduct reality checks by asking themselves if they are truly learning and progressing. It’s silly to remain mired in old, outdated ways; the emotional baggage can act as an anchor that holds us back from making quality investment decisions.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.