Is there science behind making investment decisions?
A recent article in the U.S. based Finance News Today explains the science that is at work when we make bad investment decisions:
Scientists have shown that when humans think of making money that the chemical dopamine is produced in increasing amounts. Dopamine has nothing to do with the decision making part of the brain. The more dopamine that is produced the more our emotions guide us to make the wrong decision. The process of delayed gratification is also something that can guide your brain to making a decision that is less affective than if you thought about it and used the logical part of the brain.
The article also goes on to tell you how you can stop this happening, by recognizing the situations that trigger emotional decisions, and by setting your goals for the long-term and not going for investments which involve a lot of “drama”. Which is pretty much a sound investment strategy, science or no science.
Unfortunately for most they let their emotions rule the decision making. At best they make an emotional decision, then look for logical reasons to justify it.