Plan Performance Direct

THE Wealthier + Wiser Blog

Helping you better understand your money so you can reach your goals

Does human emotion play a role in the way investors behave?

The Powerball reached soaring numbers in 2016. The news of an estimated $1.56 billion jackpot reached the news, making it the largest lottery winnings in world history. Days before the drawing, people lined up to purchase tickets in hopes of winning the grand prize. Everyone was wanting to get in on the action of the Powerball. The lottery demonstrates a pattern of human behavior on the patterns of fear and greed with money. The fear of not buying a ticket with such a small investment that could lead to a mass fortune. Then there is the greed, that is buying many tickets even though no amount doesn’t improve a chance of winning. This mirrors similar emotions that stay within investors on Wall Street. Investor psychology over rules when the market makes moves whether they go up or down. Learning investor inclinations as well as psychological emotions will help us understand how they play vital roles in the motivations behind the stock market will give better insight to the market. Some of the worst cases we have seen in history with the market go back to 1987 with Black Monday, 1999-2000 Dot Com Bubble, and in 2008 with the Stories of the Great Recession. Each one of these represents how psychology took over and turned the economy ugly. No matter what, the economy will always face uncertainty and risks. Review your portfolio and stay diversified. Talk to a trusted advisor and ask questions. If not, don’t play into the fear and greed cycle of the stock market.

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