Using Regret For Better Long-Term Decision Making

Karen Van Voorhis, CFP |


When should I get into the markets?

When should I get out?

What will the rest of this year look like?

What if the presidential election goes this way, or that way?

Will the recession continue?

Will this pandemic ever end? What should I do if it does? What should I do if it doesn’t?

In times of uncertainty, decision-making becomes extraordinarily difficult. At some point you’ve probably asked yourself questions like these.

When this happens, we are inclined to draw on the world around us to make logical decisions – ones that will presumably be in our best interest. But here is the problem: we are, biologically, not structured for long-term decision making.

We have come from ancestors who necessarily had a sense of immediacy. They had to hunt and gather. Survive one more night. Hunt and gather again tomorrow. Eat or be eaten.

There was no long-term planning, simply because it wasn’t possible to plan beyond the next day or two. 

So, our inability to plan for years from now actually isn’t our fault – it’s literally a factor of our evolution, and is hard-wired into us.

As a result, it’s particularly challenging to do the things that advisors say we should, like “invest for the long-term” or “set it and forget it!” When we are faced with crises – pandemics or a recession or economic uncertainty, or even if we just don’t feel confident for whatever reason – these directives are rarely comforting, and they don’t seem to make sense.

Many studies have shown that disrupting an otherwise thoughtful long-range plan (investing a certain amount each month) with short-term actions (suspending that investment program when the markets feel unstable) does indeed provide instant emotional relief in the short-term. The bad news is that these actions rarely provide any measurable benefit in the long-term. In fact, reactive decision-making often leads to worse outcomes.

To combat this, here is an effective exercise that may be useful.

Imagine your current scenario – maybe you think you should wait to get into the markets, or you’re already invested but are thinking of pulling out some or all of your funds. What decision might you make today, that you think might cause you the most regret three or five or more years from now? What decision might you make today that could cause you the least amount of regret some years from now?

Regret can be a very toxic emotion, but if you are able to recognize it can be harnessed for the good of your long-term portfolio and to avoid today’s urge to make a move that may ultimately prove to run counter to your long-term plan.

We also fully recognize having the urge to do something. Doing nothing – i.e., sticking with your previously-established plan to invest, for example, and not reacting to a market decline – is often completely unsatisfying. Doing something feels much better! And indeed, advisors often have an uphill battle to convince investors to simply do nothing, to wait it out, to continue with their investment strategy.

The next time you have the urge to be reactive to the current economy, political events, or market movements, ask yourself, “What decision can  I  make today, that will cause the least amount of regret, years from now?” Often, simply framing the dilemma in that way is enough for investors to realize that continuing on their planned investment path is the best decision for the most favorable outcome.