How to Develop a “No White Knuckles” Investment Philosophy

How to Develop a “No White Knuckles” Investment Philosophy

Investing has risk – not investing has risk too. The key is to formulate a philosophy – a way to think about investing that you can stick with for the long-term.

When you ride a roller coaster you hold on tight, a “white knuckles” experience. You feel anxiety, fear, and stress. You might have the same emotions when making investment decisions because it’s something unfamiliar. You need to develop a “no white knuckles” plan.


You only make investment decisions occasionally and like anything else you do infrequently, it’s difficult to become comfortable. These three steps will help you avoid “white knuckles” experiences.

1.    Forget the words maximize and optimize. These are math concepts that portray your life as plots on an imaginary graph. Your financial life is real, not imaginary. Focus instead on developing an investment philosophy that is right for you and your circumstances. Your reason for investing is distinctly yours alone.

2.    Treat money as a tool. Like other tools, money needs a purpose. Your purpose – your goals – are unique. Money is the fulcrum that props up everything in your life. Think of money much like our ancestors thought of food – it can be consumed (spent) or stored (saved). Sustainability requires both.

3.    Expect the unexpected. History is full of surprises and unexpected events.  Expectations about money are rooted in your stories about how you think the future will look – what you think will happen. The reality is you don’t know precisely what will happen – you’ll often be surprised. Plan for your plans to not work out exactly as planned!

These components should form the core of your “no white knuckles” investment philosophy. They will help you conjure up the discipline needed to stay the course during the inevitable rough markets.

Without the undergirding from a rational philosophy, you will be tempted to fall headfirst into the “what’s happening now” investing world. Much like a dog chasing a car, chasing hot investments creates a lot of activity with little to show for the effort.

Dimensional Co-Founder David Booth says, “The most important thing about an investment philosophy is that you have one.”


Investing is aimed at making your money grow. Money is very personal. Because of this, human emotions such as fear and greed are wrapped up in your investment decisions.

Biases and blind spots cloud your ability to reasonably assess risk in your financial decisions. When your emotions are decoupled from your long-term purpose for investing, “white knuckles” experiences often follow.

Professor Ulrich L. Lehner writes in his new book Think Better about how thinking is different from feeling. As he points out, “pain is a passive experience, it happens to you. Thoughts are different because they have an active nature.” Your fear of an investment loss or experiencing an actual loss creates emotional pain – this is nearly identical to physical pain.

Some investors believe that they can eliminate risk if they have more knowledge. In reality, knowledge about any subject is always fragmentary. You never have perfect information. You can’t make risk go away no matter how much you know.

If you develop an investment philosophy centered on your purpose, the “white knuckles” experiences will end. Start there. Ready for a real conversation?