How to Make Tough Investing Decisions
There are positive and negative sides to every important decision. Many times we need to write down both sides of a choice and see which is emotional and which is practical.
A client contacted once and said, “Paul, I want to buy a piece of real estate.” She went on to explain the cost and it was going to be a little bit of a stretch, so I invited her to come to our office to visit. In our meeting I pulled out a blank piece of paper and drew a line across the top and a line down the middle of the page. On the left side of the line I wrote “Positive,” and on the right side I wrote “Negative.”
We then went through all of the positives of buying the piece of real estate and the list was long. In fact, the “good” column nearly reached the bottom of the page. There were some wonderful things that were discovered. As we wrote the positives there was a lot of excitement, and the process became very emotional. It was apparent that the emotion influenced nearly all the reasons to buy.
On the right side, there were only a few negatives to the decision. All the negatives came down to some financial numbers and practical reasons. The piece of real estate was going to cost a large chunk of her net worth.
I then came to find out that the agent representing the piece of real estate was a relative, and she wanted to help him out. This presented a problem that challenged both of their reasoning’s.
Because of the confusion and lack of transparency we decided to wait. The waiting period allowed self interests to pass and clarity to procure the right decision. Which in the end was to pass on the transaction.
About two months following this event, the client remarked how grateful she was that we went thru the Positive and Negative exercise to come to a good conclusion.
When we are presented with important decisions there is great power in putting pencil to paper and noting the positives and negatives of the choice. Then, by looking at both sides of the equation we can see which is emotional and which is practical. Also, by doing so we can identify any possible conflicting interests involved.