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Investors are Like Gardeners, Not Carpenters

December 21, 2017 by Brendan Mullooly, CFP®

On a recent episode of Hidden Brain, host Shankar Vedantam discusses a book by Alison Gopnik called The Gardener and the Carpenter. Alison uses an analogy between gardeners and carpenters to explain modern approaches to parenting.

To summarize:

Carpenters have the ability to make their workshops into an ideal creation space. They control many variables: humidity, temperature, and work surface. Carpenters also have the ability to get incredibly precise with their building diagrams and measurements. Messiness and variability are their worst enemies. They have the power to transform a block of wood into a chair, given that they use the right tools as suggested by wood2new.org. They can even can tell you step by step how it will happen beforehand. The carpenter shapes things entirely according to their own will.

Gardeners control far less of their creation process. Messiness and variability are their reality. The best they can do is create conditions that give their plants the highest possible chance of flourishing. So many variables of gardening are uncontrollable: temperature, precipitation, animals, soil type, sunlight, etc. Gardeners must adapt to ever-changing and often surprising circumstances. They can do everything right, and have nothing to show for it.

We’re all a bit guilty of treating investing like carpentry, when I find it to be much closer to gardening.

As investors, we crave the controlled, certain, and precise nature of the carpenter’s work, but reality hands us the messy gardener’s circumstances instead. Successful investors realize this, and learn to not let perfect become the enemy of good enough.

We can run inflation projections until we’re blue in the face or join the never-ending quest for the perfectly optimal portfolio, but after a certain point, we hit the law of diminishing returns. It’s comforting to spend inordinate amounts of time and effort calculating precise measurements of future variables like inflation, taxes, and investment returns, but realistically they’re just educated guesses. We get into trouble when we let this false sense of precision fool us into thinking we have all the answers.

This doesn’t mean we shouldn’t plan or analyze at all. What it means is that the ability to realize what’s out of our control is critically important. That ability will save time, energy, and sanity. You have to know when to draw the line and accept that you have done as much as possible to ensure success.

Understand that no amount of number crunching will give you the perfect investment portfolio. Instead of beating your brains in searching for the Holy Grail, figure out a reasonable allocation that you will be able to stick with.

Understand that asset classes perform at different points during the investment cycle. Instead of wasting your time trying to figure out when that will be, figure out a mix that will minimize regrets.

Understand that the market doesn’t care what kind of returns you need from it. Instead of losing your sanity watching every market move, figure out a way to save more and live on less. 

Understand that investment strategies will spend time out/under-performing. Instead of expelling your energy looking for the perfect back test, figure out which approaches you truly believe in and stick with them.

As investors, we do not have the carpenter’s power to shape things entirely according to our own will. We’re more similar to the gardener, who only controls so much. The more we try to force investing to be like carpentry, the harder we make things for ourselves. Resign yourself to the gardener’s circumstances, and don’t let perfect become the enemy of good enough.   

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Filed Under: Investor Behavior, Asset Management Tagged With: behavioral finance, long term investing

About Brendan Mullooly, CFP®

Brendan Mullooly is a CERTIFIED FINANCIAL PLANNER™professional with Mullooly Asset Management, Inc.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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