Don’t buy a cake for the cherry on it

This is an analogy I learnt from my manager at work. It aptly fits investing to save tax.

We should choose investment assets based on the merit of the assets. If the investment also comes with tax benefits, then that’s an added plus. If the investment asset is a cake, tax benefits are the cherry on that cake.

Only buy the cake that you want to eat. Enjoy the cherry if the cake comes with a cherry. But don’t buy a less than delicious cake only to get a cherry.

Picture by phiraphon srithakae from Pexels

To invest is to go out on a limb

Investing is an act carried out mostly in faith. We can look at hundreds of different data points or read dozens of books and research papers. But none of that—literally none of that—can guarantee anything about the future.

Any asset we pick, any strategy we pick—there will be a dozen arguments supporting them and a dozen opposing them. Which arguments should we accept and which ones should we ignore?

We have to go out on a limb and make our bets. We may get the returns we wanted, or we may not. The risks we took great care to avoid may play out, or they may not. If the risks play out, we get to feel smart; if they don’t, we get to look like fools for not getting on the bandwagon.

Investing is a humbling exercise. It shows us how powerless we are. It’s also an empowering exercise. It forces us to march on even when the path is dark and our legs trembling.

Picture by Caio Triana from Negative Space

Being aware of emotions

The good news is that awareness is a significant half of the solution. Knowing how and when we allow emotions to hijack us is the first step towards a solution.

The bad news is that awareness is only half the solution. When I become aware that I am acting in anger, I am usually left puzzled about what to do next. I need to pause and reconsider the situation to decide on a response. Sometimes there is just nothing for me to do, i.e., the situation is simply beyond my control.

As someone who used to get hijacked by emotions on a regular basis, this awareness is making me uncomfortable. I am still figuring out how to deal with it. I suppose I should be proud, but I don’t feel that way yet… I am still confused. 😅

Emotions hijack us

This happens often. I am in the process of doing something, but a seemingly stupid thing prevents me from doing it. I become angry. That “stupid thing” may be a broken tool or someone’s inexplicable policy or someone not living up to my expectations. Essentially, something that is not in my control blocks me.

Often, this enrages me. I go on the offensive and my focus turns into hurting or humiliating this entity or person whom I am upset with. Naturally, I forget about my original goal. Hurting/humiliating becomes the priority now.

Photo by Andrea Piacquadio

But angry responses seldom help. People are more likely to cooperate when I am nice than when I am yelling at them. I cannot persuade an inanimate tool by being nice, but being angry is no better. If I shifted my focus to what I want to accomplish rather than cursing the broken tool, I’ll likely come up with an alternate solution.

Emotions hijack us. We should avoid getting hijacked. When we unconsciously allow ourselves to be hijacked, we should be flexible/humble/honest enough to drop the emotion and course correct.