Emotion 2

Another powerful emotion that influences our financial choices is fear. Be it fear of losing, fear of missing, fear of rejection or any other fear, this emotion switches our brains off and makes us act irrationally. For example, a young gentlemen inviting his date to a restaurant may feel fear of rejection when a skilful waiter intimidates him into buying a bottle of a pricy wine. Instead of politely refusing the expenditure, the gentlemen will most probably spend even all of his money just to save his face.

In financial markets fear is what drives people sell their holding when the price goes down, only to discover that the stock will recover to bring others good results.

Warren Buffet once said “be fearful when others are greedy and greedy when others are fearful” to summarize an investment behavior of people driven by the two emotions. But does it mean that this tactic will always be successful? Not necessarily. Nevertheless, we urge you to take a step back and think for a few moments whether your decision has rational grounds or it is emotions that make you act impulsively.

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