Wednesday, November 28, 2007

Don't be a Footsie neurotic - Fear and Greed

 The reason why the stock market has been around for so long?  Same reason that any activity involving fear or greed has been - receptors in the brain.  The more they fire, the more you need them to fire to feel at least as good as last time.

Plunging stock prices ignite the same circuits in your brain that respond to the snarl of a lion. Just a flash of the red colour that symbolises a downtick is enough to excite the circuitry in your brain - and to make reflective thinking more difficult.

Merely reading the words "stock market plunges" in this sentence will raise your pulse, quicken your breathing, increase your blood pressure and tense your muscles.

If you needed to make a snap decision about a stock immediately after reading those frightening words, you would involuntarily have been propelled toward selling. Yet, because emotions can often be unconscious, you might well believe that you had made a reasoned decision at the very moment you were in the grip of a primordial fear.

Source: Don't be a Footsie neurotic - Telegraph

I think there will be a lot of Neuro-Economicists in the future.

And the best reason to ditch your Blackberry and become a techno-idiot like Warren Buffett?

Psychologist Paul Andreasen found that investors who received frequent updates on their holdings earned half the returns of those who got no news at all.

Ignorance is bliss.

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