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:

The Hype Cycle of DIY Investor Self-Confidence

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. There are more important things in life now, like apparently starting my own elementary school…

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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The Hype Cycle of DIY Investor Self-Confidence from My Money Blog.

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