The Hype Cycle of DIY Investor Self-Confidence

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In an article about the challenges of autonomous vehicles, I came across a chart of the Hype Cycle from the consulting firm Gartner that supposedly models the life cycle of new technology:

Maybe it’s just me, but I found this curve to also describe my self-confidence in investing over time.

  • Trigger. One day, something makes you want to learn about investing. For me, it was finally leaving broke academia and getting a “real job” that had triple the salary and this 401(k) match thing.
  • Peak of inflated expectations. Read some books! 8% annual returns… double my money every 9 years… yes! Asset allocation… backtesting… of course! 4% withdrawal rate… just accumulate 25x expenses… simple!
  • Trough of Disillusionment. I get laid off at the same time that my nest egg drops in half? No way. After an entire decade, which is 1/3rd of my lifetime so far, I could actually end up with less money than I put in? No way. Multiple countries will shut down completely for 3+ months at a time, one after another? No way.
  • Slope of Enlightenment. After some time, that advice about diversification, liquidity, understanding true risk, and knowing your temperament starts to feel a bit different. There is still more to learn.
  • Plateau of Productivity. Wow, that last crisis wasn’t as bad. I have a plan and have enough assets and liquidity to implement that plan. My overall vision has changed and it includes working for longer but at something that I enjoy and without short-sighted corporate metrics.

Of course, maybe I’m still be overconfident, and I haven’t truly hit that big trough yet. Good thing I stocked up on the antacid.

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Comments

  1. This chart looks to be spot on from my experiences. And not just for investing. I built a deck and definitely went thru these phases.

    Before starting it, all I have was a drill and some screw drivers. So a lot to learn/buy/etc. But, had the desire to learn and do it myself. That dip down is where I seriously started to think about having a contractor finish it. Really glad I choose to finish it myself.

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