In this sixth installment of my investment sins series, let’s explore the emotion of anger (sometimes also known as “wrath”) and how it can screw up our investments. As the saying goes, don’t get angry, get even ! There is some truth to this statement as it is basically trying to tell us to calm down and think through the situation in order to identify the optimal solution to be implemented. Anger is an emotion which clouds our judgement and causes us to do impulsive things which we may later regret.
Basically, the book by Maury Fertig talks firstly about the targets of wrath, which is where we, as investors, like to target our anger when something goes wrong. During bear markets (such as the current one) where everyone sees falling prices and gets a sense of helplessness about their investments tanking daily, anger can be a particularly powerful emotion. The problem is that investors generally do not know where to channel this anger constructively and end up blaming:
i) The Media (for dispensing an endless barrage of bad news which makes markets tank)
ii) CEOs (for not managing their companies properly)
iii) Financial Analysts (for downgrading their favourite stock) or
iv) a Group with a Vested Interest (such as the Federal Reserve which is responsible for the mega bailout plan for auto-makers and financial institutions). Whatever the case, anger which is misplaced often has negative effects for the investor, as it causes him to lose focus and make bad investment decisions.
Next, Mr. Fertig talks about being “normally angry” and being “sinfully angry”. Confused ? He goes on to explain the differences between these two terms.
- Never blames himself for an investment which has gone wrong.
- Always looks for scapegoats to vent his anger upon.
- Makes impulsive investment decisions (in the heat of the moment).
- Finds the stock market more stressful and aggravating than other aspects of his life.
- Is only able to relieve angry feelings by making another (impulsive) investment.
- Major investment decisions are often preceded by a bout of anger.
- Views investing as a macho competition where aggressive, instinctive behaviour is rewarded. Read more…