One simple trick that will help you invest better

Here’s how you can use the laws of psychological distance to your advantage

Sarah Newcomb 1 October, 2019 | 1:49AM
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Monkey statues: see, hear, speak no evil positions

Present bias and psychological distance, and how the physics of psychological space warp our estimation of the value of things that feel far off. And you can use the laws of psychological distance to your advantage.

Let's take the example of a landscape painting, where things in the foreground appear large and clear, and things in the background are smaller and fuzzier, with far less detail. That’s the way we naturally depict things in psychological space: Things that feel close take up more mental space and involve more detail, while things that feel far off are fuzzier, less formed, and contain fewer details. The technical term for this is construal level. High levels of construal are fuzzy and focus on the gist rather than the detail (while high-level takes the 1,000-foot view). Low levels of construal are clear and detailed as if looking at an object or event up close.

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About Author

Sarah Newcomb  Sarah Newcomb, Ph.D., is a behavioral economist for Morningstar.

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