Money can buy happiness

In a recent article in MIT Technology Review, studies found that losing money intensifies physical and emotional pain and gaining money can appease both of these sensations. The experiments conducted suggest that gaining financial resources diminishes both physical and emotional pain.

It is also interesting to note that merely thinking about having or losing money, without any actual change in resources had the described effects, since the experimenters didn’t award (or take) the subjects’ money.

Recent advancements in Behavioral Economics (sometimes called Neuroecomonics) have shown that it is often beyond a person’s ability to control their emotions and act rationally (in their own best interests). These inherent shortcomings are known to media and markets that use them to take advantage of the individual investor.

Remember, the ‘market return’ is the average of all investor returns. Every time you hear about investors that are beating the market (Warren Buffett, Yale's Endowment, CALPERs, etc.) you have to realize that there are others (often individual investors) who are underperforming to an equal extent.

As Benjamin Graham taught Warren Buffett “Individuals who cannot master their emotions are ill-suited to profit from the investment process.”

If you need some help with the emotional side of your investing decisions, contact Visible Investment Advisors.