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NYT columnist says people who keep an eye on the past make better investors

Over time, we’ve come to accept the concept that knowledge is power. In theory, when we have more knowledge, we can make better decisions. But for many of us, there can be a disconnect between knowing something and acting wisely on that knowledge. As you probably know from experience, it happens often with money.

Last week, a Stanford professor emeritus of psychology, Philip Zimbardo, along with Nick Clements and Brian Karimzad of MagnifyMoney, released the results of a joint study that showed greater financial knowledge does not in fact make us more likely to behave wisely. It seems counterintuitive, but they found that “just because you have the ability to do the math, does not mean you are more likely to be financially healthy.” They also saw poor financial health among people who described themselves as financially literate.

It turns out that simply knowing a lot about money and personal finance doesn’t guarantee a better financial outcome. But if our financial health isn’t solely about knowledge, then what does make a difference? It comes back to an issue many of us struggle with: time.

Being financially literate does matter. But the deciding factor of whether we’ll act on that knowledge depends in part on our time perspective. For example, our relationship with the past can have a greater positive impact on our financial decisions for the better than our future or even our present.

The study indicated that people who were “stuck in the past” were more likely to be conservative and take less risk. Now, it also meant they were more likely to have missed out on a run-up in the stock market, but were less likely to have gone bankrupt or experienced a foreclosure...

Read entire article at NYT