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Continuing the discussion from last month’s article of whether the market is primed for a pullback it leads to the problem of heavy social media involvement in markets that furthers the problem of making logic and fact-based decisions.
So, the missing critical facts are…
1. When did someone get information and buy in or get out?
2. Was the information obtained legally?
3. How accurate is the information?
Euphoria or Panic? Both are emotional with very little fact or process.
Although this has been going on for decades the rapid growth of social media and even alternative investment choices like crypto currency are accelerating the amount of misinformation which pushes emotions to the limit.
Another way to look at how you react to greed and emotion is if you have played a slot machine. Did you put in a reasonable amount based on your income and net worth? Did you cash out with a small profit or loss?
Did you put in more than you should have and let it ride up, down and maybe to zero?
In other words, how do you personally react to greed and desire? Does it have a similar influence on your investment decisions?
Do you have a process that helps you identify facts, clear up misconceptions, and control emotion when you make major investment decisions? Most people don’t.
Generally, research shows over 80% of our investment decisions are based on emotion and possibly 100% of other decisions in our life. This is hard to control and hard to determine and we usually end up taking too much risk, paying too much in taxes, and not preparing properly for our future.
Going through a proper discovery meeting or attending an educational event on how you arrive at decisions will help you determine if you have too much emotion, misconceptions, myths, or other missing facts built into your investment, tax, and estate planning.
Sound investing.
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