Dian's Column
Dian's Archive


Yes, we’re all a little bit crazy when it comes to money

By Dian Vujovich

Well, looks like our emotions got the best of us once again.

There’s not a nueroeconomist or behavioral finance pro out there who doesn’t keep reminding us that if it’s emotions dictating our finance picks, we’re probably losers in the game of making money. Oh, if we’d only listen.

So once again that unfeeling truth revealed itself in the choice of tiaras that Kate, now Catherine, chose to wear on her wedding day.

Lots of wagers were on the Fringe tiara but tough luck prevailed for those who bet on it. The Queen wore that one on her wedding and the emotions of some ruled it would be the pick. Fans of Diana placed their heart-felt bets on the Spencer tiara. Those bettors lost too.

And so it goes when the gambles we make have heartstrings attached.

As for behavioral finance, Barclays Wealth Private Banking has gotten into it in a big way. They now are offering clients, and prospects, an opportunity to take a Financial Personality Assessment quiz. In one of the spiral books given me showing my quiz results comes this:”Research and practical experience has taught us that many clients expose themselves to unnecessary or excessive risk by over-allocation resources to Personal Holdings and Opportunistic Investments based on emotions….”

Apparently those with big sums of money to invest aren’t sheltered from emotions ruling their financial lives either.

On Saturday, a terrific CNN program, “Your Money and Your Mind”, addressed the same topic. A couple of take-aways from that show: First, your brain is reactionary; and second,we all pretty much behave like cavemen (okay, cavewomen, too) when it comes to making money as fear– then flight –trump thinking.

Because fear is such a very real emotion and has a hand in our investment choices, one of the Duke neuroscientists on the program suggested investors take time to think about whether or not they need to react to the market news they hear. He says people need to ask themselves, “Do I need to react to this?”

Makes sense, doesn’t it.

Jason Zweig, author and WSJ columnist said that performance chasing was the biggest mistake he thinks investors make.

Before making your next stock purchase, Zweig suggests investors write down 3 reasons why they want to invest in shares of that company—- and none can have anything to do with its rising price.

To read more articles, please visit the column archive.

[ top ]