Any resemblance to actual persons or events is purely coincidental. Or not.
Let’s use a fictional story to set the scene.
Imagine yourself enjoying a cup of hot coffee with one of your best friends. This friend is never short of good ideas and always seems to be on top of everything happening in the world. At some point, your friend asks, “Have you heard about this new company? They’re about to launch a new, revolutionary product. And I know the manager. Believe me, it will make a killing and the stock will fly. I already bought 1000 shares and made 200% on my investment. And it’s only the beginning. You should invest too!” This got you thinking. On your way back home, you nervously browse the web for more information about this mysterious company. Your body and mind are fully absorbed in this quest. Once you arrive home, you jump on your trading account to buy some shares too. Pushing the buy button procures you an indescribable cocktail of emotions. How intense investing can be! The day after, a bit anxious, you check your account only to see that the stock has gone up 10%! What a great feeling. And the cherry on the cake? The investments in your portfolio are also up. Today is going to be your day and you are eagerly looking forward to tonight’s dinner to share your success story with your circle of friends.
A few months later, a series of negative news reports hit the markets; most stock markets are down, and the trends seem like they are here to stay. Your investments are down too and some of your financial gems are suffering to the point that you are considering selling everything. Luckily the stock of this biotech start-up you really like is still up 24%. You have an appointment this afternoon with an advisor to discuss insurance policies, but you are really not in a mood for that. The economic situation could worsen, and you wonder if it is really a good time to invest more. Surely, the situation will be better tomorrow, you just need a good night’s sleep. But tomorrow brings more bad news. The biotech start-up you have in your portfolio is down 50%. Their vaccine submission was rejected by the health authorities. That’s enough. You’re done with investing.
Three Familiar Old Friends
Although these stories are slightly exaggerated, they do paint a clear picture of the kind of emotions we go through when investing. Now, let’s cross the barrier of our skull to see what happens inside our brain.