Pro Tip: When in doubt, avoid the extremes.
Seeking the middle ground is essential to avoiding worst-case outcomes.
Life is more like playing a game of tennis than a box of chocolates. Unforced errors often determine the thin line between success and failure.
The amount of time you spend between the extremes clarifies your character. Without good character, nothing else matters. The Greek philosopher Aristotle spoke about this at great length.
The qualities of character can be arranged in Triads. The first and last qualities will be extremes and vices; the middle quality is a virtue or excellence. So between cowardice and rashness is courage; between stinginess and extravagance is liberality; between sloth and greed is ambition; between humility and pride is modesty; between secrecy and loquacity, honesty; between moroseness and buffoonery, good humor; between quarrelsomeness and flattery, friendship.
Investors can learn much from temperance. Transferring Aristotle’s ancient wisdom into actionable moderate investing behavior would benefit all investors.
Some examples include:
- Between Fear and Greed is Nervous Patience: It’s not easy holding the line when the market takes an inevitable turn south. Being uncomfortable for a short period is far superior to bailing out or ratcheting up risk at the worst possible moments.
- Between Overspending and Miserliness Are Mindful Purchases: There’s nothing wrong with spending your hard-earned money. Just make sure you make purchases that give you lasting joy. The sweet spot between impulse purchases and lagging regrets about what could’ve been is the ultimate goal.
- Between Reckless Speculation and Risk Aversion is The Balanced Portfolio: Risk tolerance tests aren’t reliable indicators of your level to absorb market mayhem. Investors don’t know their capacity to handle market meltdowns until one happens. There’s nothing wrong with allocating half your portfolio to stocks and the remainder to high-quality Government Bonds. This portfolio is insurance against the high probability your risk tolerance score is inaccurate.
- Between Pricey Elite Universities and not attending College are Quality State Schools: Spending 100k on college costs is a high price for bragging rights about your kids. Many state universities offer similar outcomes to schools that cost three to four times as much. Moderate tuition sans student debt is available for those who like driving in the middle lane of life.
- Between Market Timing and Portfolio Neglect is Annual Rebalancing: Trying to time the market is chasing fool’s gold. On the other hand, ignoring your portfolio for decades isn’t a wise option either. Bull and Bear markets throw allocations violently out of whack. Rebalancing your investments once a year keeps things tidy and relieves the temptation to act on your short-term impulses.
Like a healthy garden, the fertile Golden Mean is the best soil for your investments to take root and prosper. Seeking perfection is impossible and a colossal waste of valuable time. Not sabotaging yourself and being good enough is an underrated strategy in a world where the loudest voices win.
