Here is a great post by John Authers at Bloomberg News: Powell Is Leaving Markets Dazed and Confused.
The main takeaway… at a certain point, indecision itself often becomes a decision, whether you like it or not. Authers argues that the Federal Reserve Board has dithered in developing a policy to handle increasing levels of inflation in the U.S. economy. For the past few months, the folks at the Fed have argued that inflation was transitory, but in hindsight this now looks misguided. So why hasn’t the Fed started raising rates yet? Because they are decisive in their indecision.
Indecision in personal finance
We can learn lessons from the Fed and apply them to our personal financial situations. Indecision pervades personal finances and presents a core hazard for many individuals and families. For example, estimates indicate that about 50% of Americans over 55 don’t have a will. And the rich are just as likely as the poor to forgo a will. History is littered with very wealthy people who failed to implement an estate plan: Prince, Aretha Franklin, and even Abraham Lincoln (and he was a lawyer)!
Investing for the future is also an area vulnerable to indecision. Many first-time investors are reluctant to dive in. They can’t stand the thought of putting their money at risk. So they wait and analyze. And analyze. And analyze. Getting stuck in so-called “paralysis by analysis” is a real threat to younger investors. When you have the advantage of long investing time horizons, the best time to invest is now.
How to move forward
How do you get past indecision and get on with the task at hand? There is a great quote from the movie We Bought A Zoo:
You know, sometimes all you need is twenty seconds of insane courage. Just literally twenty seconds of just embarrassing bravery. And I promise you, something great will come of it.
– Matt Damon (playing Benjamin Mee), from We Bought A Zoo
Sometimes you just have to get on with it!
If you don’t have an estate plan, pick up the phone and call a lawyer. Or use an online service.
If you want to begin investing, take $100 and buy an index fund. Then buy some more next month. And the month after that.
Do whatever it takes to move forward.
Look at the broader goal
Do you love your family? Think of your estate plan as a final act of kindness to your family and friends. Or even an investment in their future well being. When you are gone, they can focus on their grief and healing with the knowledge that you made plans to assist them.
Do you love your future self? Then think of your investment portfolio as a gift to that future version of you. Living within your means, saving, and investing today is the equivalent of giving a great big hug to your future self and investing in their future success.
