Whether you believe in God or Darwin, something has gifted human beings with a “flight or fight” response. This decision making ability which appears to happen in the grey matter of the brain can help guide us to safety long before the white matter in our brains has a chance to evaluate inputs and decide accordingly. When our cavemen brethren experienced this phenomenon, they may have been deciding between fighting a saber tooth tiger or fleeing to safety. Their “gut instinct” helped them in their response.
Thankfully we don’t have to decide between flight or fight of saber tooth tigers, but we do have opportunity to listen to our gut. The gut instinct draws upon subconscious experiences to provide answers to questions we may not even be asking.
For instance, I had barely been paying attention to the looming Brexit vote last week. I understood the facts, and I knew the vote was happening. I briefly thought about how it may impact me. At the time, the “remain” vote was leading 52% vs 48% so I felt relatively comfortable that everything was going to remain status quo. However, my gut told me to take a closer look. My gut told me to consider moving to cash. My gut told me to look at VIX options. My gut told me that the polling numbers were too close to simply do nothing and hope for the best.
The problem with evolution is that our white matter got larger and overtook the grey matter diminishing the value of gut instinct. I rationalized myself out of making any changes to my portfolio. I decided that if the pundits weren’t worried, why should I? I purposefully shut down my financial survival instinct much to the dismay of my portfolio.
I know that things will smooth out and I should recover my losses one day but I am mad at myself for ignoring my gut instinct. I think it exists for a reason and I will make better efforts in the future to listen to it and act upon it.
We may not be facing too many saber tooth tigers these days, but we still need to listen to our gut for survival and success.