Pre-commitment
Also called: precommitment device
Deciding calmly in advance how you will act, and arranging things so that your future self follows that decision.
Investors use pre-commitment to limit decisions driven by fear and greed: a written investment policy statement, automatic monthly investing, a waiting period before unplanned trades, and checklists to complete before selling.
Learn more in these lessons
- Emotional decision-makingHow do you stop fear and greed from making your investment decisions?
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