One of my favorite Magnus Carlsen quotes is:
“Of course, analysis can sometimes give more accurate results than intuition but usually it’s just a lot of work. I normally do what my intuition tells me to do. Most of the time spent thinking is just to double-check.”
Carlsen states the importance of inner intuition in order to decide how to proceed in chess correctly.
Should you follow your intuition in other areas of life too?
How do you know when you should follow intuition or when you should analyze a situation?
Making decisions based on intuition can be dangerous too. It is very easy to move your pieces carelessly around the chess board, or randomly trade stocks with no real goal foreseen, just because it makes you feel you are doing something useful. But then, upon analysis, you find your “intuitive moves” led you to a dead end. And you will just hope that won’t be your financial end too.
Should you follow your intuition?
As Carlsen states, the time he spends thinking is mainly dedicated to double checking his intuitive ideas. Before he acts on his intuition, he checks to see if it is trustworthy. But don’t forget, his intuition comes from having played tens of thousands of chess games, and from studying all of the major games that have been played throughout history. Have you developed such a deep intuition in dealing with investments?
What does your intuition tell you about diversifying your assets or creating a financial plan?
It’s crucial to double check your financial moves, and make sure they make sense, even if you are sure your intuition encourages you to make a particular move.
Look at the overall picture.
In chess: Are your pieces placed well on the board? Are you missing a trap that your opponent set up?
In finance: Do you have an emergency fund to balance market risk? Do you have insurance to mitigate a loss if the unforeseen happens?
Fix any problems that you see.
In chess: weak pieces.
In finance: a weak plan. Do you have a financial plan? Is it updated? Are you on the right track to meet it? If you see your initial plan may not work out the way you intended, analyze your situation to figure out a better move.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, is an avid chess player, international investment advisor, and Certified Financial Planner (CFP®).