Posted By: Admin
Friends sometime back I was reading an article in Business world written by Prakash Iyer, a fantastic speaker and thought leader. It struck me how familiar the Bicycle Effect is to investment decisions we make. The Bicycle shed effect is a case to illustrate that we allocate a disproportionately large amount of our time and thinking to trivial and simple decisions, while we do less contemplation on the big decisions due to the little understanding we have or the complexity of the issue involved.
I would urge you to click this link below to read the original article written on the Bicycle effect by Prakash Iyer. http://www.businessworld.in/article/The-Bicycle-Shed-Effect/22-05-2020-192992/ .
Even in the personal investing space, there are decisions that can be classified as complex and those that are relatively simple.
Complex personal investment issues could involve,
On the other hand, Simple personal Investment issues could involve,
Simple decisions are like comfort food, they are nice to do, keep you feeling fuzzy, while they are necessary, they are often not the most important decisions in the overall context of your portfolio. Usually these are discrete one time decisions and more short term and tactical in nature. Complex decisions are tough , one needs to devote the mind space, think and contemplate, it is tough on the mind ( especially if your mind is filled with other issues that relate to your office or family). You are forced to think about the negative consequences or outcomes and also prepare a detailed review process that will entail more time / energy to make the task a success. These are more long range plans and the success or failure will also hinge over the long term. These are more strategic and behavioral in nature.
Some of the factors leading to Bicycle shed effect in investing
So the next time you are making an investment decision, spend a minute contemplating if you have addressed those big strategic issues ( aka nuclear reactor matter relating to your investment portfolio) or are you just spending time on the bicycle shed aspects of your investments.
Credits : An article by Prakash Iyer
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