Spheres of Control

As a kid I came up with a concept called “Spheres of Control” which helped me accomplish goals as well as relieve stress along the way. Here’s how it works: take out a piece of paper and draw three concentric circles. In the smallest one write “Control”, the next one put “Influence” and the last one “Aware.” Draw an arrow starting in the middle circle pointing outwards. The goal is to have your circles be as large as possible and ever expanding outward (by definition there are things even outside your circle of awareness, most things in fact).

The key in any given situation or endeavor is to understand clearly what sits inside your sphere of control and focus your energy primarily on those things. Unfortunately, most people spend time complaining about things for which they have awareness (but no control or even influence), but not doing much about things over which they have control. Let’s apply this to investing.

Investors often take action when it least serves them because in taking action they feel a sense of control in an otherwise chaotic and seemingly out of control situation. They spend countless hours obsessing over things they have zero control over, and very little time optimizing things in the bullseye of their control circle. Specifically:

Investing Sphere of Awareness (but no control)

  • Short-term market movements

  • Trump tweets

  • Fed announcements

  • Commentary by TV financial pundits

  • Bad headlines

  • Market predictions (by themselves or others)

Let’s compare those with what resides in the inner circle.

Investing Sphere of Control

  • Establishment of clearly defined financial goals

  • Asset class allocation

  • Savings rate

  • Investing amounts

  • Buy/sell decisions

  • Diversification of portfolio

  • Quality of companies in portfolio (financial strength, history of dividend payments, payout ratios, etc.)

If you focus on and largely get the things right over which you have control, then those things over which you have no control will invariably fade into the background as your goals are achieved over time.

The next time you are dedicating energy to investing related activities, mentally place what you are working on in one of the spheres. If it does not fall within your sphere of control, ask yourself if you can expand that circle to encompass it. If not, consider how to better allocate your time for improved results, not to mention far less effort and information overload-induced stress.

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