Control is Overrated: Why Doing Less Can Mean More

Many things outside of our control continue to feel… outside of our control these days. Last month, we talked about the actions you can take to help alleviate your financial anxiety without throwing your financial plan off course.

Geopolitical instability has continued throughout April, which then created a lot of wild volatility in the world of finance, with huge single-day market value drops and one of the largest single-day market value increases in decades.

If you’re paying attention to traditional and online media, we hope you’re also taking time to step away from those sources to recognize the degree to which these constant changes are creating the same degree of change in your day-to-day life. We hope it actually isn’t that significant.

If you’re wondering if now is the time to review your investments… well, it may not be. To quote, apparently, several people, “Your portfolio is like a bar of soap… the more you handle it the smaller it gets.”

But if you can’t help yourself, because you’re a human, that’s okay. A lot of people just have to look. We get it.

If you happen to open your statement, or login to your dashboard, you’re going to look at the balance. That’s what everyone does, even those people who claim to have absolutely no emotional response to their portfolio values.

Emotional responses to the value of your portfolio, your bank account, your real estate, and anything else are normal. That’s why we said “claim”. Everyone, even the hardiest financial gurus get pretty excited when their accounts rise in value and pretty sad when their accounts decrease in value. Of course they do. Don’t believe the hype.

How Information Access Impacts Your Decision Making

Your investment portfolio is valued nearly every day, taking weekends and holidays off. That’s actually pretty weird, if you think about it, compared to other kinds of assets you might own.

If you own real estate, you may get an annual property value report from your province. Depending on your province, the valuation date – generally at least 6 months in the past – and other things you might know about real estate in your neighbourhood, you’ll probably take that valuation with several grains of salt.

If you own your own business, private equity or debt, jewelry, or art, you’re probably not going to get reports on the value of those assets very often either. In the case of art, jewelry, and your own business, you’re very rarely getting a valuation report at all.

The fact that you’re not getting daily updates on the values of these assets doesn’t mean they don’t fluctuate in value just as much as the stocks, bonds, and other financial instruments in your portfolio. They do. We just don’t have regular data.

Studies tell us that, despite the adage to “buy low and sell high” many investors do the exact opposite with their investments in the stock and bond markets.

In our experience with real estate and private business owners, if an accurate valuation is received and the result is lower than expected, the decision is not to sell until valuations reach the preferred level.

That’s a significantly different response.

This different kind of decision making is not because people are dumb. Very smart people find it hard not to sell when markets are low. Why?

Liquidity & Administration

You have the ability to sell your financial market based investments pretty quickly, with minimal costs. The barriers to selling are really low.

Compare that to financial, real estate, and business investments that have limited windows during which a sale could occur, or which would require a great deal of effort and cost on your part to sell.

With your investment accounts, the ability to act rapidly is pretty easy. Your other investments require more time and effort, which can give you the ability to step back, breathe a bit, and make a more careful decision. It’s not you – it’s the structure.

Pattern Recognition

Humans are pretty good at pattern recognition. Our brains are structured to think forwards. If we see a chart demonstrating the values in our accounts going down… and then down… and then down again… over a period of time, we’re going to naturally think this is a trend. This is the way it’s going, and that way is to zero. Why wouldn’t we get out?

Conversely, with our other kinds of investments, the time between reports can be lengthy, which can smooth out trends. Our excellent, pattern-recognizing brains will see less volatility, and likely, much less rapid drops and gains.

The Illusion of Control

Ellen Langer, Harvard psychologist and widely considered the mother of positive psychology, coined the term “the illusion of control” in her 1975 paper with the same title. Langer conducted six different experiments on this bias. In each experiment, a game of chance was played by participants. Her findings were that participants’ confidence in their chances of winning were based on a number of different factors, none of which actually had anything to do with their chance of winning. Their confidence lay in their perception of the other players’ skills, which weren’t relevant, they assigned higher value to lottery numbers they’d picked themselves (also not relevant), and became more confident in their odds the more time they spent thinking about it.

Research has demonstrated that we experience many things differently depending on whether or not we feel like we have a degree of control. The more control we feel, the more confident we are in positive outcomes.

When it comes to the financial markets, it’s pretty obvious that the only control we have is to buy, or to sell.

With our real estate, we feel a bit more control because we often participate in the staging and upkeep of the property, as well as the negotiations over the purchase. Neither of these has a greater impact on the actual selling price, as compared to the overall area market valuations. But it sure feels like it does.

When it comes to our businesses, if we are the ones operating those businesses and making decisions, our confidence is incredibly high – despite the fact that the vast majority of businesses fail.

What You CAN Do

We know we feel more confident when we feel like we have a degree of control. So how do we create that in our own lives without making decisions that harm us in the long run?

Here are a couple of actions you might consider. These actions won’t work for everyone, but one, or several might work for you.

Option: Read Your Statements Once a Year

If you have the ability to ignore your statements, looking at them once a year will give you the same level of information that you might get from your real estate valuations. The pattern will be slower, and smoother.

Option: Take Your Hand Off the Controls

Some people are great at managing their own portfolios. Some people would be great at managing their portfolios, if only they could look away. Depending on who you are and what you need, it may make great sense to employ a professional portfolio manager to help you by creating a barrier between you and the action that could torpedo your portfolio.

Option: Look Backwards – Over the Long Term

Don’t compare your valuations to yesterday. Instead, compare your valuations to last year, the year before that, and the year before that. If you’re calmed by spreadsheet creation (don’t judge, some people are!), then creating one that shows your valuations now, and every year in the past as long as your accounts have been in existence, can really help.

Look at years that had great returns like 2023 and 2024. Look at years that had awful returns like 2022, 2008, and more. What are the patterns over the very long term? How much of the value has to do with your contributions and how much of it has to do with market growth? Given those very long term patterns, are there actual changes you might consider making?

Option: Choose Your Sounding Boards Wisely

For some reason, a lot of people brag about their portfolios. At some point, we’ll dig deeper into that and how kind of strange that is. In the meantime, let’s just know that the phenomenon exists, and we often hear from friends, family, colleagues, neighbours, social media pundits, podcasters, and more about how smart they are. Many people want to be seen as experts and will spend their – and your – free time pontificating on their unique approach to investing, which is sometimes replete with “secrets”.

When it comes to investment management and decision making, please limit your exposure to people who claim to have secret, unique, or special, complex approaches. There lies madness.

Great investing is boring. Dull as dishwater. Quite honestly, it’s one of the reasons why we at Spring Planning left traditional investment management to focus on the really interesting stuff: people. If you’re choosing sounding boards for your investment decisions, which can be a great idea, please choose the people whose approach is mind-numbingly tedious and doesn’t get you jazzed at all, unless you’re jazzed by spreadsheets and steady returns that trend cautiously in the direction you want to go. Like us! We’re jazzed by all those things.

Talk to us anytime. You know where to find us!

Your Spring Planning Team

Practice Notes:

Julia will be out there doing a little public speaking throughout May, starting with a private Women & Wine event sponsored by Leith Wheeler, continuing with an Advice Only Planners’ event sponsored by Steadyhand, and ending the month as co-host of the Family Enterprise Canada Symposium in Halifax! 

Spring Planning’s offices will be closed on Friday, April 18th for Good Friday, Monday, April 21st for Easter, and Monday May 19th for Victoria Day. 

Spring in the News:

If Trump’s tariffs have you worried about your job and your money, you’re not alone. Julia spoke with the Toronto Star about weathering the storm. Check out the article here.

Julia spoke with the Globe & Mail about “finfluencers” who provide financial education via social media. Find out more about what to believe (or not!) here.

Please check out our media page here for videos, podcasts, interviews and more.

Planning News Digest:

• Advice on retirement’s ‘softer side’ – Our good friend (and go-to for annuity consulting) Adam Chapman discusses how Financial advisers are expanding their role beyond money management, helping retirees navigate life transitions, find purpose, and prepare emotionally for their next chapter. Check out the article here.
• Capital gains inclusion rate increase – You may have already seen this but just in case: the capital gains inclusion rate increase that was the talk of the country last year was officially cancelled. More information here.
• Five questions cross-border experts are facing – People with U.S. citizenship, green cards, and U.S. assets are asking a lot of questions right now. Check out the questions and answers here.

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