How can you not love index cards? They force you to be concise and narrow down your thoughts into a limited amount of space. They have been successfully to identify investment strategies and entire personal finance processes as well. Here is a personal finance philosophy boiled down to five principles.
Shane Parrish at Farnam Street notes how the difference between principles and tactics is crucial both to our development and our understanding of the world.
Tactics provide the “what” and the “how.” And just like in football, sometimes that can be enough to get a result. But if you want results no matter how the landscape changes, you must also understand the “why.” By understanding the principles that shape your reality, your “why” will more accurately guide your thoughts and actions.
Investing is an obvious space where the talk between principles, strategies and tactics can get all entwined. Brett Steenbarger at TraderFeed in a recent post notes how apply the index card approach to trading can serve as a useful learning tool. He writes:
Here’s a great experiment: Quickly, write down the principles that guide your trading. Only give yourself a couple of minutes for the exercise.
If you can’t enunciate your principles quickly, they are not an automatic part of you. It’s when principles are front and center that they form the backbone of trading process. That can only happen when we focus on principles and keep them conscious.
This approach applies equally well to investing as well. If you are fumbling around to identify your principles, you really don’t have any. That’s okay. It’s better to start with a blank slate (or index card) then have to edit what is already a morass of incompatible strategies and tactics. As I noted in my original post:
Writing things down, especially about money, can be a painful experience, but makes the implicit, explicit. The power of the index card is that it is the right amount of space to put relatively simple rules on to paper.
Making the subconscious, conscious is important in money and in life. Sometimes, something as simple as a pen and an index card can take you a long way.