In my Stanford finance class, professors stated clearly: liquidity equals choice and flexibility, which is inherently good. We were taught to value this, accepting lower returns for the ease of access to our cash. It all seemed so clear-cut—L(x) was the liquidity premium in the equations, and that settled it. In that academic utopia, investing in stocks was a no-brainer: passive, potent long-term growth, with the added perk of being able to liquidize swiftly and with negligible costs.

After graduation, I landed on the research desk at Goldman Sachs, right at the beginning of the late 1990s tech bubble. It was like watching a surreal drama unfold—the higher the stock prices soared, the hungrier people got for a piece of the action. 'This has to keep going up,' the crowd seemed to say, ignoring how absurd the valuations were becoming. And I'll confess, even I got swept up, casting “rational” bets on ephemeral prospects (remember E-toys?). But when the crash came, all the once-eager folk were scrambling to get out, precisely at the very bottom.

Observing this paradox, it struck me how those models I learned at Stanford, for all their elegance, couldn’t encapsulate the wild, human unpredictability of the markets and how emotionally difficult it is to stick to your plan when your wealth is getting eviscerated. Liquidity, I realized, also paved the way for hasty, fear-driven decisions that we later regret.

This story isn’t new: you've likely read about this phenomenon countless times. But experiencing it first-hand jolted me. I experienced again in 2008, amidst the subprime mayhem. The same investors who capitulated in 2000 once again offloaded their assets at the bottom of the market's plunge. And then again in the Covid crash of 2020. Amazingly, in the subsequent 2021 tech boom I found that I was again nibbling in the crazy high flying stocks. In hindsight I couldn’t believe I hadn’t learned my lesson.

The lesson: we’re not rational. Even after decades of investing, even after reading every book, even after seeing it first-hand over and over again. Emotions get the better of us. For instance, the GALBAR study showed that the average investor underperforms the index by 3.5% due to erratic timing and decisions – buying high, and selling low.

My answer is something far from what the economists would prescribe. LESS liquidity. More real estate. More long dated funds. Yes, my approach is imperfect, maybe even irrational to an academic, but it's tailored to recognizing my behavioral quirks. It’s akin to the K-safe in my kitchen. The K-safe locks away sweets with a timer, guarding me against my primal impulses. It too is a sign that I’ve recognized unlimited choice, flexibility, and access doesn’t lead to my best decisions.

Embracing less liquidity has surprisingly become a behavioral bulwark, forcing me to think, then rethink again, before making any moves. A 6% realtor commission has a sobering effect on the mind. Moreover, not receiving daily price ticks keeps me blissfully ignorant of the minutiae, while the regular cadence of rent checks and dividends provides a psychic cushion against the volatile swings of the stock market.

Are there better ways? Sure. My friend Khe invests the same amount every month, with rules for acceleration during market downturns. You can always hand the keys to a financial advisor. But I’ve found something that works for me, and that surpasses any theoretical approach I once believed.