How 20 Seconds Can Make You a Better Investor
Investors are taming impulsive money moves by adding a little friction to financial transactions
Investors are taming impulsive money moves by adding a little friction to financial transactions
To break the day-trading habit that cost him friendships and sleep, crypto fund manager Thomas Meenink first tried meditation and cycling. They proved no substitute for the high he got scrolling through investing forums, he said.
Instead, he took a digital breath. He installed software that imposed a 20-second delay whenever he tried to open CoinStats or Coinbase.
Twenty seconds might not seem like much, but feels excruciating in smartphone time, he said. As a result, he checks his accounts 60% less.
“I have to consciously make an effort to go look at stuff that I actually want to know instead of scrolling through feeds and endless conversations about stuff that is actually not very useful,” he said.
More people are adding friction to curb all types of impulsive behaviour. App-limiting services such as One Sec and Opal were originally designed to help users cut back on social-media scrolling.
Now, they are being put to personal-finance use by individuals and some banking and investing platforms. On One Sec, the number of customers using the app to add a delay to trading or banking apps more than quintupled between 2021 and 2022. Opal says roughly 5% of its 100,000 active users rely on the app to help spend less time on finance apps, and 22% use it to block shopping apps such as Amazon.com Inc.
Economic researchers and psychologists say introducing friction into more apps can help people act in their own best interests. Whether we are trading or scrolling social media, the impulsive, automatic decision-making parts of our brains tend to win out over our more measured critical thinking when we use our smartphones, said Ankit Kalda, a finance professor at Indiana University who has studied the impact of mobile trading apps on investor behaviour.
His 2021 study tracked the behaviour of investors on different platforms over seven years and found that experienced day traders made more frequent, riskier bets and generated worse returns when using a smartphone than when using a desktop trading tool.
Most financial-technology innovation over the past decade focused on reducing the friction of moving money around to enable faster and more seamless transactions. Apps such as Venmo made it easier to pay the babysitter or split a bill with friends, and digital brokerages such as Robinhood streamlined mobile trading of stocks and crypto.
These innovations often lead customers to trade or buy more to the benefit of investing and finance platforms. But now, some customers are finding ways to slow the process. Meanwhile, some companies are experimenting with ways to create speed bumps to protect users from their own worst instincts.
When investing app Stash launched retirement accounts for customers in 2017, its customer-service representatives were flooded with calls from panicked customers who moved quickly to open up IRAs without understanding there would be penalties for early withdrawals. Stash funded the accounts in milliseconds once a customer opted in, said co-founder Ed Robinson.
So to reduce the number of IRAs funded on impulse, the company added a fake loading page with additional education screens to extend the product’s onboarding process to about 20 seconds. The change led to lower call-centre volume and a higher rate of customers deciding to keep the accounts funded.
“It’s still relatively quick,” Mr. Robinson said, but those extra steps “allow your brain to catch up.”
Some big financial decisions such as applying for a mortgage or saving for retirement can benefit from these speed bumps, according to ReD Associates, a consulting firm that specialises in using anthropological research to inform design of financial products and other services. More companies are starting to realise they can actually improve customer experiences by slowing things down, said Mikkel Krenchel, a partner at the firm.
“This idea of looking for sustainable behaviour, as opposed to just maximal behaviour is probably the mind-set that firms will try to adopt,” he said.
Slowing down processing times can help build trust, said Chianoo Adrian, a managing director at Teachers Insurance and Annuity Association of America. When the money manager launched its online retirement checkup tool last year, customers were initially unsettled by how fast the website estimated their projected lifetime incomes.
“We got some feedback during our testing that individuals would say ‘Well, how did you know that already? Are you sure you took in all my responses?’ ” she said. The company found that the delay increased credibility with customers, she added.
For others, a delay might not be enough to break undesirable habits.
More people have been seeking treatment for day-trading addictions in recent years, said Lin Sternlicht, co-founder of Family Addiction Specialist, who has seen an increase in cases since the start of the pandemic.
“By the time individuals seek out professional help they are usually experiencing a crisis, and there is often pressure to seek help from a loved one,” she said.
She recommends people who believe they might have a day-trading problem unsubscribe from notifications and emails from related companies and change the color scheme on the trading apps to grayscale, which has been found to make devices less addictive. In extreme cases, people might want to consider deleting apps entirely.
For Perjan Duro, an app developer in Berlin, a 20-second delay wasn’t enough. A few months after he installed One Sec, he went a step further and deleted the app for his retirement account.
“If you don’t have it on your phone, [that] helps you avoid that bad decision,” he said.
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It’s easy to buy clunkers when you’re caught up in the moment. But regrettable purchases aren’t inevitable.
Trying to buy just the right souvenir on a trip is a risky business. You can wind up with a lifetime treasure—or an albatross you feel stuck with forever.
Consider the giant painting of a chicken flying out of Cuba that has been hanging over our couch in Palos Verdes, Calif., for the past 15 years. Buying it cheaply seemed to make sense when we were in Havana, since my husband’s family had fled the country after the revolution.
But the flying chicken just didn’t seem as, well, poignant by the time we returned home and hung the 4-by-7-foot painting. No guest has ever said a word about it. “I can’t help you with the chicken,” an art dealer told me long ago when I asked for help in selling it.
So, how do you find the right souvenir? Or is there even any such thing?
For many people, the answer to the second question is an unqualified “No,” and they have stopped trying. “Souvenirs never look as enticing or beautiful as they did at the time of purchase once you get them home,” warns Patricia Schultz, the author of “1,000 Places to See Before You Die.”
After collecting rugs on her trips, then Christmas ornaments, before running out of room at home for both, Schultz says, “I have gone cold turkey. I collect memories.”
But for others, surrendering just won’t do. “It’s intrinsic when people travel that they wind up bringing a keepsake of the journey,” says Rolf Potts, the author of “Souvenir,” a book that traces the history of travel souvenirs back to the earliest recorded journeys.
“It can be a way to show off,” he says. “Much like the envy-inducing travel posts on Instagram.” But for many people, he says, “It’s proof you were there, not only to show other people but also for yourself.”
For those who lean in this direction, there are ways to help avoid regrets. Tara Button , founder of the Buy Me Once website, and the author of “A Life Less Throwaway: The Lost Art of Buying for Life,” suggests focusing on practical items that fit your lifestyle and double as mementos.
As an example, she once bought a “very affordable” baby blanket made from alpaca fiber on a trip to Peru and now uses it every day. The blanket not only reminds her of “the time pre-children when I was traveling,” she says. “It goes over my 2-year-old son every night. It’s always soft and always gorgeous.”
She has a friend who collects one cup from each destination. “Those are perfect memory keepers,” she says. “A small item that is used every day.”
One obstacle to finding the right souvenir is that it can be hard to think practically when you are swept up in the excitement of a new culture. Consider the Burmese puppet, 15 inches tall, that has spent about two decades in the closet of Liz Einbinder , head of public relations for Backroads, an adventure-tour company.
“We saw a lot of puppets everywhere and just got caught up in all of the Burmese art and culture,” she says. Now she wonders, “Why did I bring this back? It sits in the back of my closet and I can’t seem to get rid of it. It creeps me out when I see it.”
When that buying urge sweeps over you, Button and other travel experts suggest pausing to consider your lifestyle, taste, needs, and the scale of your home—you’re going back to the reality of your everyday life, after all.
But that doesn’t necessarily mean being entirely practical. Einbinder collects miniatures, mostly miniature houses, from every country, and has more than a hundred. Most are in storage, but she keeps a little London bus and a little Egyptian pyramid on her desk. For her, souvenirs aren’t just about memories, they’re also about the hunt. “It gives me something to search for” on each trip, she says. “That’s half the fun.”
Another way travelers often go wrong is by giving in to pressure, or at least persistence, from salespeople.
When Kimba Hills, an interior designer, went to Morocco, she hired a guide who took her to a rug store in Fez, where the dealers delivered a whirlwind sales pitch while serving tea. She wound up buying a $4,000 flat-weave Turkish rug, measuring about 13 feet by 9 feet.
“No one in my group could believe I got seduced,” she says.
When the rug finally arrived at her home in Santa Monica, “It smelled like cow dung,” she says. Washing the rug was going to change the color.
When she called the dealer in Fez and demanded her money back, he refused, offering to send her a different rug instead. “We got into a yelling match,” says Hills. “All my skills went out the window.”
Looking back, she says, “You are in a buying mode because you are there and feel like you should buy something.” On a recent trip to Mexico, she bought nothing, explaining, “I’m wiser.”
Spontaneity can cut both ways. There’s the chicken painting. But waiting for inspiration to strike, rather than planning to go home with a souvenir, can still help.
Henry Zankov, a sweater designer, says that when he travels, he explores his destinations with the idea that he won’t buy anything unless he comes across something he loves. He still buys plenty, but says “I don’t have regrets.” At his home in Brooklyn, he has ceramics, vases and glassware from shops he found randomly in Spain, Greece, and Italy. “I buy what I have to have,” he says.
There are times he doesn’t find anything. “So I just give up,” he says. “It’s OK.”
Some souvenirs do become the treasure of a lifetime.
Annie Lucas , the co-owner of MIR, which offers tours to less-traveled destinations, became captivated by a mirror on a trip to Morocco. It was made with hand-pounded silver and pieces of camel bones.
She went back to the store three or four times, debating the cost and whether she would regret it once she got home. It was heavy and measured 24 inches by 40 inches.
“That was 15 years ago, and I still treasure it,” she says. “If I had to get out of my house and had only five minutes to pack, I would grab that off the wall.”
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Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.