Fear of the unknown, doomsday scenarios and ultimately "losing it all" drives a smattering of investors to make emotional decisions on financial matters.
Given that investors are bombarded by 24/7 news loops and market advice coming from every possible avenue, investment professionals say emotions during the investment process may be beyond your control, often genetically predetermined or manifested during childhood.
People are most likely to make decisions about their investments based on unique emotional responses shaped by their early life experiences, including the "imperfect love" a child received from their parents; childhood events that featured danger, threat or loss; the influence of key authority figures in a young child's life; family values and culture, and more, explains Chris White, seasoned investment counselor and author of Working with the Emotional Advisor: Financial Psychology for Wealth Managers.
"I've counseled individuals for 25 years and noticed there is a huge sensitivity to loss, whether anticipated or actual, which can be devastating," White says. "I find this especially true during bear markets, such as what the country experienced in 2008. Loss is twice as painful as the satisfaction felt during a gain, an emotion first derived in childhood. As a child, you experience this perfect love and are the center of your parents' universe, until suddenly you get a little older and discover this is not exactly the case. This realization is especially devastating to a child, and how the child reacts and rebuilds following this loss ultimately determines what we eventually become."