Owen Raskovich

There are two different types of thinking, at least according to psychologists such as Daniel Kahneman, who suggest that the first level of thinking is the type of thinking that you might be able to do when you're driving your car around a corner.

So really basic kind of instincts, heuristics, gut feel, those decisions.

Those decisions to run away from someone who has a knife.

That's the kind of stuff that helped us survive for centuries, the human race to move forward and evolution to kick in.

But in today's modern world, and when it comes to investing in particular, those are not the types of decisions you want to make.

When your ETF or your shares or your investment property falls 5%, your gut instinct is telling you to pull out now or forever hold your guilt.

Forever, you will have lost that 5% because that is what you are feeling.

That is the rush of blood that's telling your brain to act, act, act, fight or flight, deal with it now.

But those are not the right ways to deal with investment decisions.

That is not the right way.

What you want to be doing is using your second level thinking.

So first level thinking was the thinking that you could do while you're driving your car around a corner.

And in investing that might be, oh look it has a low price earnings ratio or dividend yields are 5% or more.

The other type of thinking is the thinking that you can't do driving around a corner.

You might be driving right now.

I hope you're focused on the road, by the way.

But if second level thinking is the kind of stuff you can't do while driving around the corner, it's the kind of stuff that you have to sit back and really think about.

It's not your knee-jerk reaction.

It's not a decision that you can make with haste.

You know, I would say a decision like buying a house is typically one that people spend time thinking about.