I’ve recently come across a a great article about human nature, and how it impacts investments decisions.
A link to the full article is below, but this is a quick summary of the findings:
- One of our oldest automatic responses is fight or flight
- In a fearful situation, the body’s fight or flight response kicks in and the impulse to run can be overwhelming
- As cave-men this was an important survival instinct, but in modern times, we are faced with very few really risky situations, yet our response mechanism is the same
- In investing, a fearful situation can trigger the same response, but often ‘flight’ is the worst option, and is usually counter-productive
By overcoming your natural instincts, and taking emotion out of investment decisions, you are more likely to arrive at the right choice.
This is hard to do in the face of falling prices or stockmarket panic, but the most successful investors are the ones who can look through this noise.
The full article can be found HERE.
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