The Reinvestment Test

A simple way to make better life decisions

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I would like to introduce you to one of the simplest yet most powerful decision-making principles in investing: The Reinvestment Test. It can help you make better decisions no matter what you are investing in. It’s a way to cut through the noise and make rational, unbiased choices about when to sell an asset you hold.

And, the most important thing: it works — not just for investments — but for many situations where you need to decide whether to keep something or let it go. This means you can use The Reinvestment Test when making decisions about jobs, relationships and other types of attachments and obligations.

The Key Insight

If I had to boil down The Reinvestment Test to one key point, it’s this:

Selling something is the same as deciding not to buy it.
Not selling something is the same as deciding to buy it again.

You are probably a little bit confused. But I promise, the principle is deceptively simple. Let me explain.

Whenever you have a thing that you are able to sell, but you choose not to sell it, you are effectively deciding to buy it again at…