That’s what the book, Your Money & Your Brain by Jason Zweig says! Zweig simply points out that making investment decisions is one area where intuition and snap judgments simply don’t work and where our first reaction is usually the wrong one.
Read the review of the book here.. Excerpts:
Zweig’s basic premise is that our the function of our brains evolved to serve early humans in their quest to survive in a sometimes hostile world. While few can argue that humans have succeeded in dominating the planet, our brains haven’t quite kept pace. We still react to investment news and make decisions with the same mental firmware that allowed our forebears to avoid getting eaten by large carnivores, and that often leads us to poor investment choices.
Zweig points out the foibles of our investing brains, which are programmed to find patterns in the world around us. That may be good for coping with the natural world, but it is less useful for investing. For one, we leap to conclusions. If something happens twice in a row, we automatically project a third occurrence. We do this automatically and unconsciously.
Our “prediction” circuits are driven by the release of dopamine, a powerful brain chemical related to pleasure and rewards. This is one reason why people are drawn to stocks that keep going up; unfortunately, this neural extrapolation is usually setting us up for a fall.
So stop taking instant, impulsive decisions about your finances. Attending a “Personal Finance Workshop” would help!