This week’s top reads are all about keeping it simple. The Personal Finance section includes an article about why it’s sometimes important to do nothing, how the endowment effect can cost us money, and how advisors may not always have our best interests in mind when adding complexity to our portfolios. The Personal Interest articles will help you to identify your team members’ superpowers and to better choose which startup metrics to share when presenting to venture capitalists. For more articles like this, check out Raghav’s two previous Top Reads articles here and here.

Personal Finance

When Doing Nothing Means Everything

Have you found yourself feeling panicked when the stock market goes through turbulence? Brendan Mullooly uses an analogy to explain how important it is to remain calm and conserve your energy during rip currents in the water to survive; the same approach should be used when dealing with a stock market crash.
During periods of turbulence in the stock market, some of the best advice an individual can receive is to do nothing. The time and place for assessing a portfolio’s alignment is not during a market downturn. A good investment strategy is proactive, not reactive.
This approach takes discipline, but the outcome will ultimately be worth it. Read the full article here.

Be Careful What You Choose

A group of participants was asked to rank six paintings in order from their most favorite to least favorite. They were then told they could take home the number 3 or number 4 painting on their list. Each participant chose to take home the third painting and a few weeks later they were asked to re-rank the same 6 paintings. The participants ranked their chosen painting higher than when the activity was initially performed. This same exercise was done on people with anterograde amnesia (their short-term memory lasts only 30 minutes), except instead of taking their paintings home, the participants were asked to re-rank the paintings again after 30 minutes, when they would have no memory of ranking the paintings. Surprisingly, these participants had the same results as the previous group. This exercise demonstrates that once you make a choice, your preferences will change more favorably towards that choice, which is at the core of the free choice paradigm. When it comes to our finances, the free choice paradigm explains the endowment effect, the idea that you place higher value on the things that you own.
By making a choice to own something (i.e. a home, an individual stock, etc.) you are unknowingly increasing its significance and value in your mind. This can create conditions that cost you financially, such as not selling your losing stocks (the disposition effect) or overvaluing personal assets such as your home.
Read more about how the endowment effect can have an impact on your financial decisions here.

With Finances, Keep It Simple, Stupid (Even If You’re Rich)

We tend to make things more complicated for ourselves than they need to be, and the same can be said about our finances. Scott Hanson warns that if your advisor recommends adding more complex financial tools to your portfolio, it may be his or her way of securing your business, rather than recommending what’s best for you.
There is this unsubstantiated perception among some investors that significant finances call for complicated actions. But a lot of these actions can come with a separate tax structure, or they are attached to a partnership, unforeseen details that need to be factored in.
Read the full article here.

Personal Interest

Why Talented People Don’t Use Their Strengths

In this article, Whitney Johnson explains the importance of recognizing your team’s individual talents. Our strengths are often ignored and omitted from our resumes because they come easily and naturally to us. When asked to put these skills to use, we may feel as though we are not being challenged at work and hesitate at the opportunity. However, Johnson is adamant that if each member of your team is encouraged to play to their strengths, they can become a great innovator.
As a leader, the challenge is not only to spot talent but also to convince your people that you value their talents and that they should, too. This is how you start to build a team of employees who bring their superpowers to work.
Read the full article here for tips to help you identify your team’s strengths and an example of how this technique worked at the recent Super Bowl.

VCs Say These Startup Metrics Don’t Really Matter

Fast Company shares the metrics that are truly important to venture capitalists and which ones are overrated. Some of these metrics may surprise you, including revenue projections, which don’t really matter and tend to be inaccurate says Arteen Arabshahi, principal at Fika Ventures. Instead, share your rate of growth. You may want to share your proofs of concept and letters of intent, but according to Yida Goa, partner at Struck Capital, these metrics are not nearly as important as your customer attrition rate. For the full list of the five metrics you may think are important and which metrics to share instead, read the full article here.

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From time to time, the team at GuideVine highlights certain topical videos and content from expert financial advisors. We find these helpful and hope you will to for your managing personal finances. To learn more, you can view and find potential advisors through our advisor matching service and listings, ask one-on-one personal finance questions to these experts, and view “How to” videos on our YouTube channel (https://www.youtube.com/channel/UCJopbGDSgc1szGZaoUPqTrA).