money health weekly


Sometimes We Get It Wrong


"Always plan for the fact that no plan ever goes according to plan."

-Simon Sinek


We all know that one person who does stupid things and always makes really bad decisions. How frustrating is it when that person gets some good luck and the bad decision was rewarded? Likewise, we've all been in a place where we do everything right but can't seem to catch any luck. We ask ourselves why we put in the time when it seems like it never turns out our way and we see dimwits doing well and they make bad choices. 

There is a difference between a good decision and the right decision. It is possible to make a great decision and have the outcome turn against you. It is also possible to make a bad decision...or worse, not make a decisions, and have that result in a good outcome. I want to encourage you to focus on your decision-making process and planning, not the outcomes.

decisions versus outcomes

Making a Good Decision with a Bad Outcome

For starters, I need to clarify that a bad outcome doesn't necessarily mean an outcome that harms you. It could mean an outcome that wasn't as good as another outcome you could have had. For example, maybe you were rebalancing your investments and were searching for a fund that tracked companies in foreign companies, an international fund. You got it down to a choice between two investments companies, both with low expense ratios and low turnover (both of these indicate they are low cost investments) but the only difference is they track a different index. You choose one. The other one does better over the next year. The fund you chose still did well. It doesn't matter; you still feel regret. 

This is my point. If you had a good process for picking your fund (low cost, covers the area of the market you need it do, fits into your overall investment plan), then it shouldn't matter whether this fund did better than that fund. Your process is solid, and I'm giving you permission to be happy with that. 

At the risk of sounding like a statistics teacher, most decisions we make have probabilities assigned to them, and there are so few decisions that have a 100% probability of success that we'll call it zero - there are no decisions that have a 100% chance of success. All this means is that if you followed your process and chose an option that would be the best option 99% of the time, one out of 100 times that would not have been the best choice. But again, that doesn't make it the wrong choice