Mental Bias Monday: the Spacing Effect

Hi ,

This Monday I’m reflecting on the Spacing Effect and how it might relate to our investing performance.

The spacing effect is simply the fact that we recall information better if we learn it with spaced repetitions. This is in opposition to one session of cramming information, which I’m sure you have done many times before an exam.

I’m definitely guilty.

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For most of school and university I would simply study just the days before the exams, as I always thought I had better things to do at other times. Mainly skateboarding and snowboarding, listening to music, a bit of gaming, reading fiction, you know very important things.

Luckily for me I had somehow always taken notes rewriting by hand both what teachers and professors say as well as what I would read in the material when cramming. This practice involves a whole array of cognitive boosters to improve memorisation, which I think made my cramming practice effective instead of confusing or overwhelming to deal with.

I almost always did quite well in school. I still take notes and journal by hand, even if I love technology. I definitely recommend you start scribbling as well if you don’t already.

Anyhow, when did I stop cramming? When I got interested in what I was being taught. When I had a goal with the learning. A purpose. And a way to apply the learnings immediately. This was at the Aalborg University which is heavily research, team work and practical oriented. We were building prototypes while learning, infusing and applying all subject matter instead of isolating into subject silos. I found that for some exams I didn’t even need to study all of a sudden!

Now what the hell does all this have to do with investing?

If you invest actively, even if it means reviewing your portfolio once a month or so, you are dealing with learning information all the time. Often we need to absorb and make sense of a lot of information fast.

One approach is to not be too self aware and just do your best in the given moments. This is basically cramming, even worse if it happens because we are reacting instead of acting (see previous newsletter “Are you a reactor?”).

An upgraded approach is to give yourself specific times that you schedule for yourself to focus exclusively on your investing strategy and application.

You will find that once you establish a fixed routine, you will spend much less time “getting into gear” and can jump right into working on making those good high value decisions that lead to the money.

Even more so when you have specific goals you are aiming for and you are monitoring your progress. This is where routines become fun.

Strong why + routine = wins.

A fixed routine where you focus takes advantage of the spacing effect, improving your cognition.

In my “Learn to invest confidently in 30” days course the lessons are spaced on purpose and I guide you to build your own investing routine and review regularly to ensure your personal life context doesn’t get in the way.

Spacing our focus is a quite simple concept, but we easily forget to apply it as life gets in the way.

Hope this gives you a new perspective on your habits and routines as we start a new week.

Have a good one,

Chris

Originally posted 2nd October 2023 on ElliottSays.com

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