Deciding badly: Four states that cost a lot

Most bad money decisions do not come from a lack of knowledge. They come from a bad moment.

You know the right answer. But you are tired, rushed, angry, or bored. And you do the opposite.

First state: tiredness. After a long day, our ability to choose well wears down.

In the evening, we take the easiest option. We click, accept, sign without reading. We put off whatever takes effort.

Sellers know this. Impulse buys online and sloppy decisions often come late.

The rule is simple: an important decision is not made in the evening. It waits until the next morning.

Second state: urgency. "Offer valid for twenty-four hours." "Only three places left." "Decide now."

This urgency is almost always manufactured. It serves one purpose: stopping you from thinking.

A real bargain can survive a night's thought. If it does not, it was not a bargain.

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Third state: anger. The market has fallen, you feel betrayed. And you sell everything, to punish it.

Say ten thousand euros, which fall by twenty per cent. Eight thousand euros. You sell, furious.

Then the market rises by twenty-five per cent. Those who stayed get back their ten thousand euros.

You stayed at eight thousand. The market did not feel punished. You are the one who paid two thousand euros.

The market does not know you exist. Being angry at it is fighting the weather.

Fourth state, the most unexpected: boredom. A well-built investment is boring. There is nothing to do.

So we look for action. We buy, sell, follow trends. Just to feel active.

Every trade has a cost. Say ten trades a year, at zero point five per cent each, on ten thousand euros.

Five hundred euros a year gone in fees. Before even counting the bad choices.

A famous study from two thousand measured it across tens of thousands of American households. Those who traded most earned clearly less than the market.

For all four, the remedy is the same: create a delay between the emotion and the action.

Write down your rules in cold blood, when all is well. And reread them before acting, when you are tired, rushed, angry, or bored.

In finance, doing nothing is often the hardest decision. And the most profitable.