103 - Why Doing Nothing Could Save Your Portfolio

Why doing nothing might be the best move for your portfolio right now.

In this episode, we dig into action bias — that psychological urge to "do something" when the market tanks — and explain why it can lead to terrible decisions. We cover how action bias shows up in over-trading, panic selling, jumping on fad stocks, and making emotional moves that kill returns.

We’ll also show you how to combat action bias by building an investing strategy that matches your risk profile, automates your discipline (like our YieldMax strategy), and protects you from sabotaging your gains.

Whether you’re tempted to tweak your portfolio daily or sitting on cash dying to "buy the dip," this episode will help you resist the noise and stick to a plan that actually works.

🧠 Learn how to:

• Spot action bias before it wrecks your returns
• Stop panic-selling in volatile markets
• Create a strategy that keeps emotions out of your investing
• Build an emergency fund that makes action less tempting
• Use diversification and conviction to stay the course

🎯 Sometimes the best move is no move. Here’s why...

Want FREE weekly market updates, Tim's top 10 dividend picks, and our portfolio updates delivered right to your inbox? Subscribe to our email list.

Stay connected. Follow us on social!

**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

Episode music was created using Loudly.

Transcript

Welcome to roaming returns a podcast about generating a passive income with dividend stocks so you can secure your finances and liberate your life. 

Are you feeling like you should “do something” right now with your portfolio? Stop. Breathe. This week’s episode breaks down why the urge to act — even when things feel chaotic — can absolutely wreck your long-term results. We’re diving deep into action bias: what it is, why it’s so dangerous in a bear market, and how to build a strategy that protects you from yourself. Because sometimes, the smartest move is no move at all.

What are you doing? Flexing, mind-flexing for everybody. That's just huge, huge brain biceps. Okay.
Brain biceps. I'm going to bore the shit out of you guys this week. Don't lead with that.
This is interesting. I mean. Psychology is literally the premise of investing, which is why it's super important.
I mean, it's gonna be the most outstanding podcast ever recorded and everybody should subscribe. There you go. Use that big brain.
So, okay, um One of the big things that I have been encountering via either email or the people I talk to that I'm helping is there's like they They feel helpless because they the market's shit markets tanking markets volatile and they're like, what do I do? What do I do? What do I do? I mean there are like if you recall through this journey that we've put together like there are a lot of psychological triggers that cause people to do dumb shit like FOMO and herd and we all we're all prone to it One that is I think vastly overlooked that I don't see very many people discussing like whatsoever When it comes to investing is action bias. Was this in our original biases? Oh, so this should be interesting I said this is brand new to you action bias that if I just simplify it to the The raws components like where where people feel the need to take action when there are periods of helplessness Yeah, so like if you come across like if you feel helpless at home you're gonna take action outside of home or you're gonna detect overreact sometimes in home do like It's a control mechanism where like you do overcompensate or you use flawed logic, basically but the psychological or the term that I found that fits best with what I'm trying to explain to people is Action bias is our tendency to take action for reasons that are generally valid So like you'd like I want to sell my stock because the markets going down like to some people that seems like a valid Hypothesis, but it's so it's generally valid but not in this specific situation Especially when we focus on the benefits of action and ignore the costs. So The markets are crazy.
I want to sell but you're already down 20% So like even though that makes a logical sense to get out of the market because markets are volatile and you risk losing money It doesn't make sense because the cost sunk into that already some 20% loss. Yes, so it is circumstantial So in humans mind, even if acting and not acting result in the same exact outcome the outcome That outcome feels so much worse when we don't take action so like if you're presented with an option of do something and you End up with $0 or option do nothing you end up with $0 you're gonna feel worse if you do nothing end up with $0 It's just how it is like if we take it like you take a risk or take a chance or you do something and you end up with the exact same Ending point as you would if you did nothing. You're always going to feel worse whenever you don't take action.
That's Action by I said like it's core. Yeah, I never I never put two and two together with that That's interesting and I know and I understand it sounds a little like it sounds a lot like the loss aversion bias that we discussed eons ago It's in the same area code But loss aversion if you remember is when investors feel the sting of losses more intense more intensely than they do the joy of us of a similar similar size gain, so again if you option a is you Win $100 option B is you lose $100 when you lose $100 you actually you actually have trauma and Psychological Just mind fucks about that more than they win $100 So it's it but the loss aversion slightly different but action bias is I think more prevalent than anyone knows because I've been guilty of it a few times where it's like well like for example when icon Cut its dividend and it shot down like 50% after the short-sell report I'm like, well, I could do something or I could do nothing. It's just gonna keep going down Oh, yeah walk through that as an example.
That sounds like a good one. Okay back in 2023 a short short short seller report the Hindenburg or Hindenburg Hindenburg are we really talking about the helium balloon? That's what I don't know What is like it? Well, anyway, it's a short the short reports came out and said that the icon dividend was basically ran like a Ponzi scheme and it was unsustainable, which was accurate and That they were shorting the stock and the stock went from like $87 down to like $40 like in two weeks. So it lost it lost like half of its a half of its value Lots of dropping it was not and in the process when it was going down.
There was a lot of Times when I was like I should be doing something about this, but so what was going through your head walking through? Well, I know it's gonna go down more But then like logically it's like what we've already lost 27% So why would I if it goes down more it goes down more But then because there's always the chance of the rebounding really fast too, right? Because we weren't sure at that point whether or not there's always a chance The claim was that but like the logical part of my brain said, okay So if it went down 40% you have to gain 80% to get back to where you were. Mm-hmm that was like the internal conflict that I had going on like, okay, so do I Think this is gonna go up 80% I do I still do we still hold it. Yeah, we do.
We ended up sticking with it Whereas in my mom's account we ended up selling that's a different account. Yeah, because I had different strategies So what you did was you pull back out because we always talk about not investing with emotions, right? You can't use emotion like you're at all Psychological biases are you looked at the different strategies for the different accounts and with what of ours you decided to hold and with my mom's you decided that selling was because even like I first I Thought okay if they could at the time icon was paying a $2 dividend I figured they would cut it in half which they did they cut it down to $1 and I still Assumed that was unsustainable. I remember we actually discussed it I said they're gonna cut it to 50 cents at some point and they did a same exact thing just happened with Arbor where we said like we literally just said I don't even it was in the recent future like Recent past where I said Arbor is going to cut their dividend.
It's unsustainable Yeah, they'd last week they cut it from 43 cents down to 30 dividend cuts are going to happen on high yield investment Investments. It's just you can't like get all emotional because Arbor went from like but you knew it was coming $12 down to $10 So you lost like what is that? 12 is like 8% you lost 8% of your value, but even then the yield is still high 12% So you're gonna recoup that with a couple dividends So like plus you're picking up all those extra shares are like while the price was down But like well and going back to icon even looking at like I understand like okay There's not a lot like what the short seller like what the short report said. There was a lot of validity to it But if you look at the underlying Business and financials of icon they make a lot of freaky money so like to me in the van life account it made more sense to hold on to it and To me in the retirement account It made no sense to hold on to it because it's gonna take 10 years 12 years or however long it's gonna take so In one account the action bias was do nothing And the other account the action bias was to sell it.
Yeah, so action doesn't always mean movement, but it's making a decision. So basically What we have going on currently in the market is of all of some crazy volatility like one day It's up one day. It's down one day.
It's up one day It all depends what the overlord says to make the market go up and down What we're experiencing though is a vicious cycle We're suffering losses because we didn't make a change will be more emotionally taxing than experiencing losses after we made a change So like you literally could do In the current environment You could do nothing and lose 6% or you could sell go into cash or go into gold or go into oil or grow or? Whatever and still lose 6% But you still like I guess would feel better because you took you did something and still lost 6% Which to me doesn't make so this one was very hard for me to wrap my mind around because it doesn't make logical sense Like why you would feel worse if you didn't do anything Then if you did something you got the exact same result Because yeah, so I'm thinking about it like if I would have had two options and I'm actually more prone to not acting if I'm Not sure But then if I do actually have a loss then or something happens I would have gone back and actually analyze if it would have been better on the other side To figure out if I actually did make the right decision or not, but I'm not evaluating it as Like me being wrong. It was more of like, okay. What data was I missing? What actually helped me to comprehend it to her like, okay It makes sense now is my thought about death So say you get cancer and you do nothing you're gonna die of cancer if you have cancer you do stuff and you get treatments You get experimental treatments, whatever and the end the end result is still death You're still gonna feel better that because you tried you tried to do something I can see that in that stamp situation.
I still think there's like an Uncertainty thing because it's like yeah You don't know what it would have been on the other side had you not tried because you've experienced being where you're at You have an experience doing something different. Yeah, I guess I could see it when you put it it from that context I don't know. I think stocks are a little more difficult a lot of people.
It's like this Money, they can't afford to lose like financial death. So that's like again, when before we discuss this like If you're investing with money that you can't afford to lose you have to have a vastly different strategy than we have yes, if you live and die by if the market goes up one or two percent because you need like the money for like a Mortgage payment or a tuition payment or something? That's that you can't be in volatile investments if that's your deal Yeah, we uh, we may not be the best people to follow Yes, our strategy is definitely better than in my opinion the the index fund method because when those drops happen You're fully locked in you don't have the dividends to offset any of that I like ours because you actually make more money when the markets go down because you compound so many more shares So when things turn around which they always do The fruits of the labor like yeah, it's takes a little I was just talking to stuff though one of the people I help and I was walking her through her portfolio and I was saying You're down like 15% I know that sounds like a lot but you are accumulating ridiculous amounts of shares and like really good closing the funds or or Bond funds or ETFs or stocks. So like whenever it turns around you're going to have so many shares and So much more value than I did like a projection out I said if you hold on to these because she's I'll say 30 something.
I don't know. It's mid 30s Probably it'll be like 20 years 20 or 30 years before she can actually do something with her retirement account So that's plenty of time for things to turn. So I was what I illustrated was like in 30 years Just this account that you have that's like less than 200,000 right now is gonna be over a million dollars Oh, yeah, absolutely The the millions are made in these recessions these pullbacks and that's the thing to you Like we always say don't focus on the value of your stocks or your portfolio Focus on the amount of shares and seeing that like exponential increase in share quantity once prices pull down And they reinvest as long as you stick with the financials and like you read the news the company and like it's not going bankrupt Or whatever then you I mean it gets a little sketchy because when the whole markets taking a shit Companies do kind of get stressed out.
So but this will weed out the good companies from the what we're seeing a lot of right Sidebar what we're seeing a lot right now is that a lot of companies are reporting are reporting earnings and say we have no idea What's going to happen the rest of the year because of tariffs? so like it's causing like a lot of panic a lot of people are spooked and that's cause that's what's causing a lot of the Volatility is the companies are like here normally like when they have earnings report, they'll go over like the last quarter They'll say here's what we made. Here's what we sold. Here's everything and then at the end of it or like halfway through it They'll say here's what's going to happen in the next quarter and the next year Those are called forward guidances like a forward for the next quarter guidance and then the Forward for the next year guidance and the Ford guidances They're just like we can't predict anything.
So we either did or it's not given them and people are spooked Yeah, so self self-fulfilling prophecy caught like causes more panic in the markets Which I mean it makes like like a sad I mean, it makes sense If the stock market's a forward-looking mechanism and we'd nobody knows they can't predict the forward-looking part because of the current policies It makes sense to be a little spooked But at the same time that's when you have to pull out and look at like there's been times there's been like 30 times and like the last hundred years where people were spooked and if you pull it out you can see Where the spooks are in the in the huge drops But then you look out you can pull it out and look at it It went from here and it's all the way up here. It keeps going up grinds upward basically hold the course Okay, here's the following are a few reasons why investors might be experiencing action bias right now Let's get back on point. The first one is experience can't always save us a lot of investors Default, I guess would be a good a good thing mechanism is like I'm experienced.
I'm an experienced investor. I've been through The COVID crash I've been through the Great Recession I was I've been I've been investing through the dot-com bubble like all these were very really bad times for the market But they're all different in their own ways and they're all completely different than what we're going through right now so a Tendency towards action bias is something we appear to all suffer from even those who are experts in the field Even though investors may know they should stick to their financial plan They may still feel pressured to act because we are in times that have never been experienced Even the most inspite like I get emails all the time from these people have been doing this 30 40 years They're like, well, I've never been through this but here's what like there are there they start the email saying we've never been through like just crazy like one day the policy is we're gonna do this and the next day the policy is Not gonna do that in the day after that was like we have a new policy for the policy that we canceled yesterday that We've implemented the day before that crazy Yeah It is crazy just waffling going on with policy has never occurred like in the dot-com bubble if you remember the dot-com bubble like Everything that if you just put a dot-com after anything the stock market did it gobbled it up like oh, that's it It's another internet stop during the Great Recession What happened was if you were like in financials the financials they were lending out more money than they were bringing in and the banks Basically all went under the kovat crash was there was a kind of there's a few similarities with the supply Chain thing that we're about we're about to experience like in the next month or two If you're listening the news and you like doing what you watch whatever news you watch like some will say there's not a supply crunch Cummings others will say that's just a myth or It's if you just look at the raw data coming in they're not importing Yeah if they're not Importing we're not going to have shit on the shelves There's going to be a supply crunch and if people are running out to buy stuff before The severity of it is like where the wiggle room is and all the all the reporting of it Like they don't know exactly how it's gonna be like I'm assuming new like say you live in New York City You're not really gonna feel a supply crunch as you lived in the fucking Tim Timbuktu Pennsylvania where you have like the only store around use a dollar general on a Walmart like that's yeah You're the first if you're in New York. You're like the first freaking stop off the boats Okay, that was the first point experience can't always save us because this is uncharted territory that we haven't really been in So you gotta go with so that might be why people are like, oh my I might have to do something right now because this Is all uncharted? Okay, the second is seen an impact now is more salient What that means is when we take action in our current situation we can immediately see the impact So if we sell now, we know exactly what we lost how much we're gonna make.
Oh, so you're locking it in Yeah tangible if we ride out the storm We won't likely reap the benefits of this decision for months to come which can make it even harder to resist action by so this Is basically instant gratification If you're not familiar there are like I'm sure there's more than two, but there's like two major blocks Institutional investors and there's the individual investors institutional investors the ones that have like all the algorithms all the computer programs all the nerds and They all know what to do like what to do baby because of the computer said hey buy this or sell this or keep this And then you have the individual investors Which we are my probably most likely you are the individual investors the ones that like they've managed their own IRA they manage their own brokerage account and they kind of do their own research and The individual investors are the ones that if you lock it in you can like you're like so, okay I lost 10% in Ford stock you lock in the 10% loss and you get X amount of dollars back So, you know exactly what you have and then you don't have to worry about what's going to happen eight months down the road Whereas the institutional investors I guarantee you they're not selling Doubtful and if they're selling they're selling because they know that the price is gonna go down They're gonna buy the exact same stock for a better price and make more money. Yeah Okay, the third a reason why investors may be Leaning towards action bias right now is investors are struggling under the weight of responsibility, which I never even considered this but Many of us feel personally responsible to take action to protect our savings for the sake of our loved ones Like that doesn't compute doesn't compete with me but there are agenda like there's a portion of the individual investors that are doing this for like their wife or their husband or their kids Probably kids So if they lose say $60,000 and it drops down to like say a hundred twenty thousand dollars. They're gonna feel like we're like worse about themselves as a person Because they're not supplying For whoever they're doing the investing for That would be a big one for people They're taking the action bias for like a Ulterior motive of protecting their assets and their money for the sake of other people research finds that people who are in a role either familiar or Professional that makes them responsible for the outcome are more prone to exhibit action bias So like I could see this because I actually would catch myself in that situation, which is why I'm kind of glad I'm not the one riding doing the trades.
Well, it's I understand like the concept of it like I'm doing this for us But it's the most but at the same time like that's like one of the beauties of how we invest is it kind of really doesn't matter what our Principal amount is so long as the dividends keep coming in and we can we live off the dividends That's why I see the beauty in the dividend approach It's because it takes out a lot of these negatives you would have with normal types of investing and how that differs from like a lot of people's investing is they do the growth stocks or they do the Index or the index funds where they get minimal dividend growth So like when their principal goes down that affects like their psyche a lot more than people Okay, my principal drop like our principals dropped on a lot probably 16% since beginning year 16 to 17 percent, but our dividends are actually gone up. Mm-hmm We went from like we will do that chart here and probably a couple weeks a couple weeks Well, we'll do our quarterly dividend but our quarterly dividends if you exclude like the month of December in the month of January where I get kind of got kind of wonky because like the ones paid in January were paid in December and like that shit we talked about that during the last But like I'm looking at our div on we're actually getting more dividends than we did Because it's based on second month of the last quarter and then it's the second month of the quarter before that that you can see The dividends growing. Yep.
So we're actually making more money, even though our principles down 16% That's like the beauty of what we've established is that mm-hmm that makes it so much easier to stomach Everything's going down. What do you do? What like what I've been saying and people think I'm loco is like dude if you have money You should be buying whatever the hell you want because basically everything's on sale or everything's on sale And everyone's like what if it goes down more? It's like well if it goes down by more but like even if it goes down where you get into did like the monthly dividend pairs You're gonna be getting monthly You're gonna be getting a monthly income every month that you can then buy more of the same thing And your cost basis is going down down down Yeah, because the other thing is what if it doesn't go down and you lost all that so we go back to like what we were talking about like the most of the Majority of the highest days that the market goes up or during downturn downturns and when it pivots it pivots That's really quick. So you never really know in the bottoms That's why you can't just sit on the side unless you're manipulating the market like cuz you're one of the big fish Overlord did the other week when he said hey It seems like a perfect time to buy to buy stocks and the stock market went up like 4% Wonder how that happened Okay, the we are number four Yeah fourth one is action bias is a cognitive bias where individuals feel compelled to take action even when there's no strong evidence that it will lead to a better outcome the reason that I think I Mentioned that because it's important to notice that If the outcome is the same like I keep repeating this because it doesn't make logical sense.
I'm a very logical thinker I know a lot of people aren't and they use like Feelings or guts or well, so that's what's interesting. So I was trying to think like how I would do this. I think I'd actually Opt to not waste my time if the results are gonna be the same.
Well, it's but Logically, it's like if I do nothing and I get the same result if or that if I did a bunch of stuff I'd rather be efficient use use that time for something else. Yeah But although you can't predict if you're gonna get the same result, right? Okay, the fifth one is where like, okay, so I just repeated the what action biases so we all can remember because I did that Because I was the beginning. I tend to ramble.
So this is actually the fourth one. It stems from it's a control mechanism It stems from a desire for control Well, it's fourth because the fourth one was actually just repeat. So this is actually the fourth one It's a fear of missing out or feeling that doing something is better than doing nothing Even if the action is not optimal basically You go back to like when we were talking about All the biases aeons ago FOMO is probably the worst or second worst Financial like literacy bias that you can have and I'm like clean FOMO because By the time it gets to your brain and by the time your brain processes Everything and but to the point where you feel comfortable buying something it is already on its decline That's just how it works it works it you see it with like anything with currencies with oil with cryptos with Stocks with bonds and it's by the time the average investor remember that we have Institutional investors they have the computer program So they're well ahead of us So by the time the individual individual investors get to the point where the FOMO Processes to the point where you want to buy it.
It's already on its way down generally Oh, so what they so they don't use FOMO the same way that I use FOMO I actually see like what's possible with what I'm looking at and I'll wait until it's like the right opportunity So like my FOMO doesn't actually kick in until the markets are down and I see the future opportunity Control most but most most investors by the time they process the but I do have a lot I do have FOMO my time they process the FOMO and they feel comfortable buying something. It's already there's the comfort component I don't have that part. So that is so that to me sounds like a combination of herd mentality and FOMO Because everybody was in Yeah, because that's the comfort piece is the herd mentality and then the FOMO triggers in you don't want to be left out I think it's actually not being left out Reason that people might be doing this is Just like how it how it presents you might not even think that you're doing it But you're actually doing it and it presents in overtrading selling low or buying into a fad stock Right now we're having a lot of overtrading if you do like I forget what charts you used to use like you basically you have A sweet spot in the middle and then the top part is where it's over bought There's a 20 and an 80 line.
It's the overbought. It's gonna go down and when it down and down here in the bottom There's an oversold when it hits the oversold. It's gonna go up right now.
We have a lot of the People selling that shouldn't be selling issues be holding but they're over trading because they're having like a panic. Yeah, so they're all acting Yeah, they're over overreacting and over trading and that's the thing the more you trade The more times you're in and out of a stock and this is why day traders have issues one You can have hit those limits and things on your account Although I doubt people are getting right back in if they're getting in but still the more you do something That's not always better. Sometimes less is more and that's where yeah acting on a motion If you remember what Buffett says it Peter Lynch says it Oh, there's everybody like basically don't own something unless you plan on owning it for like ever Yeah for long periods of time that way that'll actually stop with the over trade and over trading is probably the number one contributor to Losing money plus then you get taxed every time you can roll one over trading when you shouldn't be trading I feel like you do that, but that's because we're trying to maximize our money But if we had a lot of money, we would literally just be sitting pretty in dividends Which is what FNA's portfolio is doing.
They're just compounding and compounding the second one. They're selling low It took me a hot minute to process that and then I remembered rocket labs Our 700% loss, yeah, because it was a loss by getting out too early It wasn't that we felt is that we got out too early because we thought I sold to 80% game I was like, oh, that's what they mean by selling though Like I was in rocket labs when it was like a dollar It was shot up to like $20 and I sold it like I want to say $8 I was like, well, that's a really good game or whatever Maybe it's $4 and I sold it $8 whatever. Oh, that's a really good game They shot up to like 26 27 dollars, and I'm pretty sure Had I held on to that one.
That would be it'd probably be a By the time it's all said and done. I'd probably be a two or three thousand percent gain. That's ridiculous.
So Whoopsie-daisy. Whoopsie-daisy. Biggest loser of last year.
Okay, so now we're going to look at how action bias actually affects investing. We were just discussing over-trading, and investors might make frequent trades hoping to capitalize on short-term gains, but this often leads to higher transaction costs and reduced returns, and generally it leads to losses. Well, so the transaction costs, most of the brokerages have gotten rid of that, but you do have the tax component.
And then if you miss getting out, yeah. Yeah, so that's one way that's one. The second one is panic selling, and in response to market downturns or negative news, investors might sell assets prematurely, locking in losses and missing out on potential recovery.
Yep. Losses aren't real until they're locked in. That's where we're at right now.
There's a lot of panic selling going on because I think it goes back to the FOMO. Everyone's like, oh, everyone else is selling. I should be selling too.
Well, that's the herd mentality piece where you feel like you're wrong if you're not doing what everybody else is doing, but the stock market is one of those things where actually  herd mentality  hurts you. It doesn't help. You need to do the opposite.
That's right. That's like literally, yeah, the one area where you should be different, but that's what we were talking about. If you're panic selling, if your stock drops 50% and you sell that money, you need to make 100% gain to get back to where you're at.
Yeah. So like on our icon, we literally have to make 80% to get back to where we were. We only lost 40%.
Yeah. That's how it doubles when it goes the other direction. But we didn't sell, so we didn't lose anything.
Yep. Yep. Yep.
Buying into fads, action bias can lead investors to chase after the next hot stock or investment opportunity often without proper research or due diligence. Think about when you're... Do they hang out around water coolers anymore? Who? People at work? It's always... It's in all my readings. It's an expression.
When you're around the water cooler at work and people are discussing stocks, don't just go out and buy what they're talking about. Research it. It's because it's just an expression where, yeah, if you're at work, you hear other people talking about it.
I'm 48 and I don't... No, I don't think there was ever people hanging out around a water cooler. I don't even remember. Most of the jobs don't even have a water cooler.
You have to bring your own water in. Except when we work at my dad's channel and there legitimately is a box of ice, the water cooler. It's like the most literal sense you can get.
But they don't hang around that talking about stocks. No, definitely not talking about stocks. They're talking about poon.
Talking about poon, talking about what they're eating and... Poon jobby. What drinks they're getting and how hot it is. I think the fourth one where action bias is actually really detrimental is it actually leads to under-diversification.
The urge to take action might lead investors to concentrate their investments in a few areas, like think right now, AI, tech, energy, whatever, increasing the risk because the more concentrated you are in one or two sectors, the higher your risk probability goes up because one or two sectors go down and 10 go up and you're screwed. But I would imagine you'd feel more confident if there's more uncertainties. You try to actually limit what you're invested in.
It's like the reverse psychology of it. You'd want to minimize what you need to control. From what I'm reading in this research, no, that's not what happens.
What happens is people just like everyone's batshit right now. So that's what I'm saying. When they move into the ones that they're more sure of... The only thing they see that working out... They're taking a ride too, aren't they? The only thing they see right now is like AI.
So they're like, oh, AI or like tech stocks. Which they'd be fine if they hold them long term. But again, they're taking a roller coaster as much as everything else is.
If not more, because they're probably manipulated. But like one of the fundamental pieces of investing is to don't under diversify. Yeah, rule number one.
That's like common sense. Okay, so then I came up with a couple of ways to combat action bias. If you're getting the urge to do stupid shit.
Getting jonesy. Practice patience. Markets will keep going up and down in the short term and the long term.
You won't always be able to buy and sell at best prices like ever. So all you need to do is be silent if you have chosen the right investments. Even if your investments are reflecting a loss.
If you have researched well and chosen the right investments, it will bounce back at some point. So the antidote to action bias is patience. I know that seems weird, but it demands a huge amount of self-control.
It is the key ingredient in long term buy and hold investing. And if you're following us, you're income investors, you're buy and hold investors. Duh.
I know we get in and out of stuff sometimes. We're about to drop in the retirement account. We're about to drop OGN.
OGN just cut their dividend from $0.28 to $0.02, so it's getting chopped. But that wasn't on a whim. That was thinking about the situation, making an educated decision, looking at everything else in the portfolio, figuring out how it's going to have a bigger impact on things.
Are there better stocks to invest in? Is there bigger gains? Because that's a freaking, that's a bigger dividend cut than Camping World was. And that was an 80% cut. Yeah.
And we're dividend investors. The whole point of this is because OGN is not going to be like a growth stock, is it? It would be all right. Like in the long run, I think in the long run, it would be fine.
And we'll probably get back into it at some point. But it's not the best bet right now. When there's so many other options out there.
It's not making us any money. As income investors, you need to be making money. If you're not making any money, then you're really not income investing.
At that point, you're doing a different strategy. Yeah. And we've said this multiple times.
There's so many other options available right now. If there's not enough money to go around, so why wouldn't we cut one that's an easy cancel? Well, if I was looking because I did the end of the month stuff over the weekend. I was looking and I was like, OK, so OGN.
But then like your mom's in like Pepsi. She's in like she has like five other options where I can just dump that money right away. And like lots of money.
So exactly. So if you are looking for a consumer good, Pepsi is a pretty good option. It's down like 40% this year.
Yeah. And it's a dividend grower. It's a really good dividend growth stock.
So that's one. Or if you're feeling friskier, Arbor did just drop its dividend and it's dropped a lot. And if you're not in ABR, you might want to consider maybe picking that up here on the kill because all the financials are pristine.
Everything's fine. It's just they cut their dividend. We're throwing more money into it as we get it.
Yeah. OK. The second way to combat extra bias is to know your risk profile and invest accordingly.
I mean, we bring this up a lot and I think it falls on deaf ears because people don't want to take that extra like five minutes to actually learn what their risk profile is. But it's like super uber important. Yeah.
We did a whole episode on this. And guys, seriously, like the beginning prep work of investing is literally what makes or breaks your ability to be wealthy. It's the beginning pieces.
It's the psychology. This literally is the foundation to set you up. Well, because if you go back to the moment, everybody skips it.
We were just talking about like when people feel like obligated for family members or professional groups are part of when they're investing. If they don't know the risk profile of the say, the collective of the professionals or like they don't know the risk profile of the family, like if you need the money like in 20 years, you really can't be risky with it and you're investing crazy. You're going to actually have the action bias present harder because you're like like you didn't do the upfront diligent work to say, OK, well, as a family, we want to be kind of conservative because we want this money to be there in five years.
And if it grows with dividends, that's awesome. If it doesn't, we'll still have the bulk of the principle there. Like that's a that that that's knowing your risk profile and your time horizon risk tolerance.
You need to make investments as per your risk profile. If you don't invest this way, action bias could affect you like ridiculously bad. How? I'm glad you asked.
For example, if you have a low risk appetite and you invest in equities, you will be more likely to keep tracking your investments, especially when they are reflecting the loss in the short term. You might sell the stock because you think it might take further losses. Yeah, this is probably not right.
This may or may not be right, but it's probably not right. The stock might do well in the long run if it's fundamentally strong before you start investing. Ask yourself if you are a low, medium or high risk taker that this will help you choose the right investment and will help you avoid action bias.
Like I mean, we gave you a like it was probably one of the better free sites to do a risk profile on. Yep. You can take quizzes and it does.
And if you find out that you're a, you know, like us, risky, like we're not ridiculous risky. We're probably middle of the road, maybe a little bit past middle, like a little bit more towards the risky side. But we have a lot of conservative investments because if you have conservative investments, it makes it easier to do risky stuff with like 10% of your portfolio.
You can do like you can take flyers, you can do fad stocks, you can dump it into crypto because you have like 75% is locked up in dividend growers. So it makes it easier to actually do risk. And they don't bring that up enough.
They don't talk about that enough. And it's like if you're a risk investor, if you're a risky investor, you don't have to dump it all into growth stocks or tech stocks. You can actually, you can kind of offset part of the losses, which will make it easier to hold your portfolio pat because you're only 25 or 30% in risky assets.
But that's me. I think that is like we were discussing like budgeting and emergency fund is like one of the most core tenets of investing is knowing your budget and have an emergency fund set up so you don't have to worry about taking money out of your investments. Well, one of the core things as an investor is knowing your risk appetite or your risk profile.
Facts. And we are not even- If you go through the long list of all of the psychological biases when it comes to finances, like you can eliminate probably 75 to 80% of those biases just by investing according to your risk profile. Yeah.
And if you guys think that we're risky, we're actually not the high risk investors. That's what I said. We're like middle of the road.
We're like, yeah, middle to high. We're like right in the middle. We mitigate.
We take risks on stuff, but we mitigate the risk through other ways so that it's like a- Calculated risk. It's like a mid-conservative risk profile. But we're not willing to take, it's asymmetrical risk is what it's called.
We take risks that have the potential of high returns. The third way to combat action bias is to have an investing strategy. You need to have a plan.
And stick into it. Don't apply it willy-nilly. No matter the circumstances.
If you can successfully create a strategy and stick with it, it should become a learned habit. Conversely, if you trade by emotion or using biases, this too, unfortunately, will become a learned habit. If you're a value investor, identifying metrics to analyze and only when investment fits your criteria do you invest in it is how you should be doing that.
Your investment strategy. We have identified numerous strategies over the years and have shared many with you. A prime strategy to really drive this point home is our yield max strategy where we buy and hold yield max ETFs, but we do not sell or turn the drip on fully, a full time until we have recouped our initial investment value.
So that literally is a strategy that we devised specifically for yield maxes where you invest in yield maxes, but you take the cash until you recoup your initial investment. That way, then the yield max can do whatever the hell you want. You can turn the drip on or you can leave it off and just keep collecting cash.
At that point, it doesn't matter because you've got your core money that you put into it back out. That's technically an investing strategy. I mean, it's something that I worked on and developed, but it's technically a strategy.
Because we follow our strategies, it literally takes every bit of emotion out of any investment like we do, especially the volatile yield maxes. That strategy with yield maxes, whenever Coney shit the bed and I don't care because well, the experiment is kind of troublesome. But in our actual VanLeft portfolio, we've already recouped all the money I put into Coney.
So everything I make now, it's like $80 a month or whatever is just straight cash. And I've already got my money out of it. So it's like free fucking money.
Yeah. And that takes all the emotion out of it. I literally could care less what Coney does.
It does. And the experiment is a completely different animal. So that one's not even a really good one to assess there.
But again, when you're emotional, we're not making... I have to break it down because in the VanLeft portfolio, I have Coney and I've actually done that with Coney. And then we have the experiment, which is a different thing just to see if we can use a loan. That's a completely different situation.
But I will say I've been getting emotional on the Coney thing, especially when we had those really low dividends because it's like, oh, my God, what's going to happen? So I'm like, you know, future projecting what could happen, what could possibly be this, be that. And that's when I'm figuring out like what options we have to potentially deal with the situation if it occurs. So that's, I guess, thinking about the worst and then planning.
Emotional. Robot. You're so full of crap.
There are days where you're like, I don't want to look at the profile. I don't want to because I just know it's a shit show. And it's like, yeah, but the way I deal with it is I'm like, OK, I'm going to think of everything that's the worst thing and then figure out exactly how I could probably possibly navigate that as alternative like plan B so that I'm not like... That's not a strategy.
That's a... Well, that's how I function. That's why she doesn't do the investment. This is why I don't do the investing.
I'm a tactician. I can't like... She's just a pretty face on the camera. That is me.
Yes. OK. Now, number four, how to combat action bias.
Sometimes the best solution is, in fact, to do nothing. There was a study by Brad Barber and Terrence Oden published in 2000, and it was titled Trading is Hazardous to Your Wealth. And they examined trading records of 66,000 U.S. households over a six year period.
They found that the most active traders significantly underperformed both the market and their less active peers. Specifically, the average active trader underperformed a simple buy and hold strategy by 7% annually. So think about that.
Let that let that percolate in the mind and digest. So if you literally just bought a stock and held it and did nothing, as opposed to someone that's all emotional action bias or FOMO bias or whatever, and they're in and out of the market doing every year, you're making like 7% more than they do every year by doing nothing. That literally is what I'm saying.
Sometimes the best thing to do is nothing. Well, that's why I was looking at it from the efficiency standpoint. It's like, if I'm going to get the same result, why would I put all this effort into it? But you're not.
You're getting a worse result. Oh, yeah, that too. But even if it's if you think it possibly.
I mean, I understand it was a study in 2000, but that's the only one that I could find that actually had like the pie chart and everything brought down. There's been other ones that have similar results. But I imagine most people who try to do that action, like they're trying to get a better result.
So it's like they don't have the predate. It's like four sites, hindsight 20, 20 type deal. But yes, so statistically, but you have to think about like, yeah, they're telling you if you don't have access to the algorithms, which a U.S. household is.
And remember, we had the institutional investors and the individual investors. Well, the U.S. households or individual investors, you don't have access to the software. You have to basically omit everything that goes on the software.
I'm pretty sure it could outperform a simple buy and hold. But unless you have access to that software or you've created your own. I'm trying to get her to create software.
What do you want me to do? Create software sometimes. It does what? Just says, hey, this seems like a good, good idea. Maybe you should invest in this.
I might be able to figure that out with the GPTs I'm playing with now. But that's so I guess I know it's not sexy, but doing nothing. I would prefer to do nothing.
OK, number five is super important. It's believe in what you invest in. Peter Lynch talked about this a lot.
Warren Buffett did. They don't say it the same way, but it's the same concept. Countless studies have illustrated that if you truly believe in the company sector or trend that you invest in, you are statistically less inclined to react emotionally.
I think Bitcoin, if you truly believe in the technology and the promise of the Bitcoin program, even when it falls 20 or 30 percent, you are less inclined to sell Bitcoin because you believe in the Bitcoin, the whole process and program that you can extrapolate that to me. So if you believe in, say, Coca-Cola, like all you drink is Coke. Personally, it's ass.
But if all you drink is Coke and you believe in what Coke does with that, like how they treat their employees, everything you believe in the company, like so when Coke drops five percent, you're not going to sell Coke because you believe in it so deeply, I guess. There's a few like like product loyalty is pointless to me, but I can see like there's people that only buy Nike's. There's people that only do Under Armour, people that only eat certain foods, people that only buy like certain brands like Q-tips.
There's like 18 different varieties of Q-tips, but they only buy like the Procter and Gamble Q-tip. So they're Procter and Gamble. So they believe in the company.
But if you believe in what you're investing in, I don't have a percentage because like the studies like they fluctuated over and over like but it was it was over 70 percent and all the all the different things I found that if you truly believe in it, you're like 70 percent more inclined to not do anything when it drops, taking action bias out of the picture. Number six is a continuation of number five. Buy what you know.
So believe in what you invest in and buy what you know. I mean, like you actually know, like the Wall Street Journal published a report using 2024 data that showed investors on average buy stocks only after after only six minutes of research. How well can you know what you're investing in after six minutes? Using emotions to buy is just as bad, if not worse than using emotion to sell.
Peter Lynch is the poster child for buying what you know, and he did all right. He made 29 percent per year over the 13 years that he was the manager of the Magellan Fund at Fidelity. Like he only bought companies that he knew, like the management, the products, the financials.
And he like he crushed the market. Yeah, the more Warren Buffett bought what he knew, the more you know, the deeper you know something, the better results you'll get. And even that book, Common Stocks and Uncommon Profits talks about doing enormous amounts of research, digging into the super deep stuff.
I don't I'm not saying to go to that. So that's actually up to date data. That was from the end of December of 2024.
They found out they did like surveys. Six minutes of research is insane. It takes me.
I was going to say, how much time does it take you? 30. Per stock? Yeah. Like a new one? Yeah, at least 30.
And even then you don't buy it right away. You have to look at the financials, but you can't look at the current financials. You have to look at the projected financials.
You have to look at the current financials. You have to look at the past financials. And you have to look at the news, like what happened like last quarter? What happened the quarter before that? Then you have to look at the earnings reports to see if like the sales are going up.
There's a lot of work that goes into buying what you know. And especially if it's a company that I'm not familiar with, like the product or like the product line or any of that stuff. So I'm familiar with most sectors like I and I know like most of the players in the sectors.
But like, for example, I didn't know that something that I had to look up is GSK. It's a pharmaceutical company that I was just reading a report about. They literally have came up with a method for fighting cancer that goes against everything that they've been fighting cancer for since like the 1900s.
So they're pivoting within their company. Like, you know, you have the surgery is an option when you have cancer. Chemotherapy is an option when you have cancer.
They actually have something now where they use your immune system and they train your system to actually defeat the mutated cells. So it's a Glyme that GSK was a Glyme something that it's a pharmaceutical company. So I have to go back and relearn that because I looked at that one previously.
I was like, well, they seem all right. But if they're doing that, yeah, new cancer, that's crazy. Yeah, that's a revolution.
So I have to like, no, I have to learn about them. So then I when I invest in it, I know the company that that's but that's like, I just brought it up because that's really cool. Like, like, it literally is really cool.
I've done a lot of research in the company previously, GSK, and I like BMI better, like Bristol-Myers better. But like, if that's what they're doing, studies they have, like they had like 122 people with butt cancer. You and your butt cancer.
Oh, my God. I'm sorry, rectal, whatever. It's butt cancer.
Hundred twenty two. They had hundred twenty two people with butt cancer, right? They gave them this. I mean, it's called immunotherapy, a method where they just inject stuff with the IV into your arm and then your cells actually defeat the cancer of the hundred twenty two.
Eighty percent got rid of the mass. What are they called? Tumors. Tumors.
The tumors disappeared and they were cancer, cancer free. So 80 percent. So it has eight.
Like, that's pretty good. Eighty percent getting rid of the tumors and being cancer free after five years. That is really good.
And the reason that butt cancer is so funny is because Tim, every time Tim has like an ache, pain or whatever, and he looks it up. I go on to WebMD or I go on to the Google and I type in, well, what could this possibly mean to my body? They always go, but they say butt cancer. I don't know how he always gets that result because when I look anything up, I never get butt cancer.
Always butt cancer. You have rectal cancer. You have colon cancer.
It's like, no, I don't. But OK. Oh, my God.
So that's why it's funny. Yeah. So and the seventh way to combat action bias is diversify.
We were we touched on it, but with a well thought out and diversified portfolio, the motion should be held in check. When some things go down, other things go up and proper diversification should alleviate losses from becoming too overwhelming. Like so what the whole like the way to combat action bias is to basically set yourself up for success in shitty times.
And the reason that people actually give in give into like the biases is because they're overwhelmed, like whether it's because they have the wrong risk profile, investing type thing set up. They have a shit strategy. They didn't do research at hand.
They're using money they can't afford to lose. Whatever the case may be, that leads to their overwhelm. So they're doing something wrong or all of the above wrong.
So they get overwhelmed. And once you get overwhelmed, it's so easy to succumb. That's the word.
So come to the. That is true, because when you have fear of the unknown, you don't even know what pieces are at play, how to interact, what they all mean. And yeah, I could see it'd be very easy to make.
That's one of the reasons, like I go super deep into everything I do, because I want to know what the hell is going on, how everything works. So that's it for the action bias. Like, basically, it is another thing to keep your mind on.
Like, do I suffer from over trading is like the the number one way. But I imagine most if you're not a day trader and you're trading like more than like once a week, you have to reconsider how you're trading. So say it sounds like Tim trades a lot more than he actually does, because I even said something to him before.
And he's like, no, I don't really trade that much. I'm like, well, you talk like you should do. Well, there's Alice's account.
There's your uncle's account. There's your mom's account. There's my account.
There's our account. There's your dad's accounts. I have five different accounts that I'm in tinkering with.
So I guess that's a good perspective. I didn't even think about that. So but I was going to say that it sounds to me like all of the indicators of the action bias kind of come with that emotional piece, too.
It's all emotion. Yeah. All the biases are emotion.
Yeah. So if you feel that emotion and that urge, that compulsion to do something, that's a red flag to pause. It's not the end of the world if you're an emotional person.
You just have to have somebody, me, or give you the data and use the discipline and all the other stuff. I'm not really a robot, but I am when it comes to trading and investing. Yeah.
You just have to pick and choose when you apply logic. I use the metrics and I have the strategy. So like if you haven't signed up for the email, you should probably sign up for the email because you get good ideas every week.
And you see exactly what we're selling and holding and buying. And here in the near future, we're going to be on the road. We'll probably do like a live stream like once a month.
We'll be doing live streams. Everybody wants to hear you. Because it's just easier.
That way when people have questions, because it's like nothing's more annoying than when I'm sitting there, I'm like balls deep in research or doing something. And she's like, we have a comment on YouTube. And I'm like, what's the comment? And she asked me the question.
I'm like, you know the answer to that. Why did you ask me? Because I wanted to be in your voice because you're the stock guru. And I am just what did you say? The pretty face.
The pretty face that owns the place. That owns the place and hands you the money. And actually tries to put things in systems that make things easier for you.
If you guys have any idea for different biases that you'd like me to do a deep dive on, because we haven't covered them all. We've covered a lot of them. I don't even know if we could cover them all.
But there are like 30 some of them. We've done probably eight or nine of them by now. Shoot us a comment on Facebook, but direct it to Carmela.
No, no. That way I don't have to deal with it. To me.
No, just drop it in the YouTube comments. It's the easiest place. Next week I have like what I'm doing next week is, like I said, I just finished the April end of the month.
So we have like the first quarter data coming in. And I'm going to pick like out of the retirement portfolio and the van life portfolio. I'm going to pick the five worst performers and see if they're still a buyer.
So like if they're a buyer, if we should just like try to get out to establish a price to get out of them out. So if you follow along with those and you have the same investments, or I'm going to walk you through like, okay, this is how much it's down in 2025 thus far. Here's like what the financials say and everything.
So that we can like go through like actual stocks at the time with the data. And then we can just determine at that point if they're by ourselves. Like I was looking, I was like, I think like because Arbor is going to be one of them.
And like when I go through the Arbor data that sells, it screams buy, but we'll go through it. We'll break it down so that you guys can have a better idea. This is a brain caught in a fence.
And that is how you feel about action bias. It's how I feel about action bias. Half in half out.
Biases are the fence around your brain. And then like when you have action bias, you start glitching out and your brain kind of like wants to come over here somewhere, but it's still caught in the bias over here. So it causes internal conflict and you become overwhelmed and you get stupid.
So brain in the fence. That's how big my brain is. Yeah, it probably is that big.
He does have a huge cranium. Look at that. Most hats don't fit his big head.
Man, purple brains. Must make you feel super smart all the time. But that'll be next week.
Next week will be a fun one. See you guys next week. Any questions or comments, shoot them to us.
I'll answer them. Bye.