The key to making good decisions is creating an environment that is conducive to success. When it comes to investing, much of this battle is fought in your mind and it revolves around expectations. Most bad financial decisions will be a result of an investor reacting to disappointment – an investment did not meet their expectations, and this triggered a feeling of disappointment which then lead to a poor decision.

Here on TOM, we’ve stated that there are big differences between long term average returns and the actual returns you experience on a yearly basis. If you hear someone say something like, “The stock market has returned 9% on average over the last 100 years” then you might expect that if you invest in the stock market then you should always expect a 9% return. Whenever we see this word expect, it should be a warning sign.

So… to equip ourselves for the realities of markets and to create that optimal environment for success, we need to first set the right expectations.

Links mentioned in this episode:

• http://thoughtsonmoney.com