Last week I discussed strategies to avoid making decisions you might regret. But what if it’s already too late? What if you’ve already made a financial decision you regret? Then what? Below are six strategies to help manage, and hopefully minimize, regret over past decisions.
1. I’ll start with a regret of my own. I recall, back in 2004, seeing an iPod for the first time. A co-worker had received one for Christmas, and it was clear what a great product it was. Apple’s share price at the time? About $4. Today, of course, it’s around $450—in other words, more than a hundred times higher. So how many shares did I purchase at $4? Unfortunately, zero.
I don’t spend a lot of time thinking about this, but if I did want to dwell in regret, the math would be easy. A $1,000 investment back then would be worth $110,000 today. And a $5,000 investment would have put my children most of the way through college. In theory, at least. But here’s the reality: It probably wouldn’t have worked out that way. My guess is that no one short of Rip Van Winkle would have been able to hold onto Apple—without selling a single share—over that many years, even as its value multiplied so many times. It’s just not realistic.
But unfortunately, our minds aren’t perfectly rational, and that makes it all too easy to compare what actually happened to an imagined, and highly romanticized, version of what might have happened. What we conveniently overlook is all of the other, less-than-wonderful ways that things might have turned out. One regret, in fact, might simply have replaced another. Suppose I had actually bought those Apple shares at $4. That would have been great, but I can imagine what might have happened next. A year later, after the price had more than doubled to $10, I easily could have sold the shares, reasoning that it would be foolish and greedy to hang on for further gains.
The bottom line: A key strategy for overcoming financial regret is to recognize that things might not have—and probably would not have—turned out to be the fairy tale that our minds imagine.
2. In recent months, while most stocks have struggled, a group of technology stocks has been seemingly unstoppable. In addition to Apple, this group includes Alphabet (aka Google), Amazon and Tesla. If you had sold shares in any of these companies this year, you might be regretting it. But what we overlook is that things easily could have gone the other way for these stocks.
Poker champion Annie Duke talks about the concept of resulting. This occurs when our minds mistakenly conclude that a bad outcome was necessarily the result of a bad decision. This applies as much to investing as it does to poker. The particular nature of the Covid crisis just happened to benefit technology companies—but that was not preordained. Imagine if things had developed just a little differently. Imagine if Apple’s production lines in China had been shut down for several months due to the virus, or if Tesla’s production in California had been impacted more than it was. Those things easily could have happened. And if that had been the case, those companies might be faring much worse than average, rather than better. In short, things easily could have gone another way. So it makes no sense to criticize a decision that made sense at the time, using the facts available.
3. Mistakes are a natural part of life. No one moves through life seamlessly, making flawless decisions at every turn. But because most people don’t like to advertise their mistakes, it may appear that others are making all the right moves. Rationally, though, you know that can’t be true. So if you find yourself stuck in rumination over a financial mistake, look at it this way: Yes, the circumstances of that particular mistake might be unique to you, but it’s not unique to make mistakes.
Once you accept that we all make our fair share of mistakes along the way, I think it’s easier to put things in the past—where they belong. In fact, “mistake” may not even be the right word. I always think, for example, of Michael Jordan’s comments along these lines: “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life.” In other words, no one wins them all—not even Michael Jordan.
4. While it may sound like a cliche, it is often true that when one door closes, another opens. Think of Steve Jobs. Only upon reflection, after many years, did he see how the setbacks he experienced early in his career benefited him later on. “You can’t connect the dots looking forward,” he said. “You can only connect them looking backwards…It turned out that getting fired from Apple was the best thing that ever could have happened to me.” So be careful not to judge anything over too short a time frame. Today’s mistake may end up being an invaluable building block toward something better down the road.
5. It may not even be your fault. One reader visited the World Regret Survey and emailed with the observation that they all seem to fall into one of two categories: mistakes for which we blame ourselves and mistakes for which we blame others. It’s a great observation. What I would add is that it’s easy to confuse the two. Sometimes we blame others for our own problems. And sometimes we blame ourselves for things over which we had no control. Both are mistakes.
6. Money matters, but it’s not the only thing. When all is said and done, money is just one aspect of our lives. In fact, if you read through the World Regret Survey, you’ll notice that the majority of the regrets submitted are not money related. Most regrets have more to do with inter-personal relationships.
It’s an important lesson: Sure, you might have a financial regret or two—or maybe more—but that’s just one piece of the puzzle. If you find yourself ruminating over a financial decision, try to broaden the lens. Take in everything that has gone well, or is currently going well. The past doesn’t care if you ignore it—so go ahead and leave it where it belongs.
