3 min read · Mar 28, 2023
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Investing can be just as much of an impulse game as shopping. The rush of excitement when you hear about a hot stock can be hard to resist. But what if there was a way to slow down and think before you invest?
One woman found a novel solution to her shopping problem by freezing her credit cards in a bowl of water. While not as cool (no pun intended) as the ice trick, there’s a similar solution for investing.
The next time you hear about a “can’t miss” stock tip, wait 72 hours before doing anything. This gives you time to let the hype die down and think about whether the investment truly aligns with your goals and values.
In early 2021, there was a lot of excitement around GameStop stock (GME) thanks to a group of traders on Reddit’s WallStreetBets subreddit. The stock price skyrocketed due to a short squeeze, and many investors bought in at the height of the hype.
However, those who waited a few days before making a decision would have seen that the stock price quickly came back down to earth, and many lost money on their investment. This is a classic example of how waiting a few days before making an investment decision can save you from buying into a “hot stock” at the peak of its hype.
Another example is the recent surge in cryptocurrency prices. In late 2020 and early 2021, many cryptocurrencies experienced massive price increases, with some even reaching all-time highs. However, those who waited before investing may have avoided the subsequent market crash that occurred in the months following those peaks.
Still confused ? Here are some additional facts:
- Impulse buying can be a major problem for many people. According to a survey by CreditCards.com, 84% of Americans admit to making an impulse purchase at some point, with an average cost of $276 per purchase.
- Behavioral economists have long studied the concept of hyperbolic discounting, which is the tendency to choose smaller, immediate rewards over larger, delayed rewards. This is often why people make impulsive purchases or investments without fully considering the long-term consequences.
- The concept of waiting 72 hours before making an investment decision is often referred to as “sleeping on it.” It allows you to gain perspective and distance yourself from the initial emotional impulse that may have led you to consider the investment in the first place.
- The ice trick mentioned above is actually a form of aversion therapy, which is a type of behavior modification that uses negative associations to discourage unwanted behavior. This technique has been used in various settings, including addiction treatment and phobia therapy.
- It’s important to note that while waiting 72 hours before making an investment decision can help prevent impulsive decisions, it’s still important to do your research and analysis before investing. This includes looking at the company’s financials, management team, industry trends, and potential risks.
- The stock market is always changing, and past performance is not a guarantee of future results. It’s important to have a diversified portfolio that aligns with your goals and risk tolerance, and to periodically review and adjust your investments as needed.
By waiting to invest in a particular cryptocurrency, investors can see if the hype and excitement around it are justified or if it’s just a passing trend. This approach can help investors avoid buying into a cryptocurrency that ultimately fails to deliver on its promises.
Patience is key in investing, and this strategy can help you avoid buying into mediocre companies that were never destined for success.
