The Cost of Fear
What are you worrying about today? If you are an investor, you’ve had plenty of choices recently: Congressional Stalemate, troubles in the Euro zone, the economy, Housing, the National Debt, Obamacare. The list seems to go on and on.
While it may seem like we live in especially worrying times, the fact is — we are always going to worry. It is simply human nature. Our brains are wired to worry about things we think might harm us. It’s a survival mechanism that protects us from danger. It’s our ancient “caveman” brain, the part of our brain that tells us to jump out of the way of a speeding car or avoid a hot stove…or panic about Greek debt.
This part of our brain — known as the amygdale — stores memories of past trauma — including investment trauma, such as losing money in the stock market. And if we’re not careful, our caveman brain can take over and cause us to make irrational decisions that can harm our portfolios. This is what I call “The Cost of Fear.