How the 'Goldilocks Rule' Might Make You a Better Investor

Imagine yourself strolling to your favourite coffee shop and ordering a delicious drink from your friendly neighbourhood barista. Unless there is a heat wave, you'll likely be expecting (or craving!) a beverage that is neither too hot nor too cold, too sweet nor too bitter, but perfectly in between.

Just like Goldilocks, we all seek — consciously or unconsciously — products and experiences that are just right. But the aptly named Goldilocks principle doesn't just apply to your morning coffee. In astrobiology, the Goldilocks zone is the habitable area around a star where the temperature is just right for sustaining life. In medicine, it can refer to a drug that strikes the right balance between effectiveness and unwanted physiological effects. And in economics, a Goldilocks economy is warm enough to keep a recession at bay but cool enough to stave off major inflation.

What does this have to do with investing? A lot, actually. Because the Goldilocks principle also plays a part in the way our minds work and how we stay motivated.

For DIY investors, the Goldilocks principle means setting goals that are high enough to be challenging and exciting, but not so great that results are beyond reach. It means choosing financial products that fit with your objectives, but also allowing time and market forces to help push you along.

We want to be challenged, but we get discouraged when we're completely overwhelmed. And yet, the path to success — personal, vocational, financial — is almost always a steep one, with potholes, setbacks and difficulty. So what is the key to staying motivated and focused, in spite of the struggle?

The key is Goldilocks. Scientists know that people experience peak motivation when the task at hand is just difficult enough to be challenging, but not completely beyond our abilities.

Putting Goldilocks to work in your own life needn't be complicated. If you want to run a marathon, it means breaking your training down into smaller, more attainable runs as your endurance grows. If it's a new level of career success you're seeking, planning a step-by-step attack and building your skills and talents will help you progress and stay motivated.

Finally, don't forget to take the time to look back and see how far you've come. Measuring your success at regular intervals will help you stay fired up about the future and visualize your ultimate success. Here's to finding what's "just right" for you!