What Can We Learn from One of Psychology's Most Famous Experiments?
What we see and don't see
The video below illustrates an experiment known as the Selective Attention Test. If you haven’t seen it before, it’s worth watching (just a minute and 20 seconds). Then scroll down for an observation relevant to investors.
The ‘invisible gorilla’ experiment is one of the most famous in psychology, and the phenomenon it illustrates presents itself all the time in the world of investing. Invariably, when investors are looking left, something appears on the right. In recent years, for example, we’ve seen a pandemic, war and inflation. And in the future, there will be other surprises. Thus, the reality is that whatever we’re all focused on today represents just a fraction of what will actually occur in the future.
That’s why a fundamental principle for investors, I believe, is to avoid putting too much weight on today’s news, to avoid trying to make predictions and instead to structure your finances in as “all-weather” a fashion as possible.