The other week, newspapers featured a story of an academic study published in the Journal of Consumer Affairs showing elderly investors had a greater tendency to making “emotional” decisions, thus selling shares at the wrong moment, such as after significant falls in the level of the stock market.
The situation is somewhat surprising. After all, older people have had many years to undertake serious reading into the subject and develop the psychological character to respond appropriately to the full range of market conditions.
According to this report, I am now at an age where I am now categorised by the media as a “lame brain”, but sadly, none of the articles I read offered much in the way of additional analysis.
The human brain has two systems.
One is reflexive – emotional. The other is reflective – analytical.
Most financial decisions involve tension between these two ways of thinking.
Thoughtful investors know their job is to restrain the reflexive response, which produces behaviour that is the very antithesis of intelligent investing.
I follow the maxim of a commentator who said: “The best thing to do at key turning points is to ignore the news completely and watch the Simpsons”.
I have found this to be good advice.
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