When our ancestors were running around in loincloth looking for food it was very important to be aware of threats in the environment. If you hoped to survive it paid you to remember where and when last you saw a lion.
Our brains evolutionary “wiring” is still today geared towards identifying threats, which we instinctively feel the need to react too in order to avoid being “eaten”. The difference now, thanks to the information and communication revolution, is that we see a lion on every corner. We are continually being bombarded by bad news on a global front. Why bad news, because bad news sells and there is plenty of it out there to sell.
Our brains are predisposed to assimilating bad news, which was fine for the odd occasion when you stumbled across a lion, however nowadays with a lion on every corner our flight or fight response is being triggered non-stop. This is no more evident than in financial markets.
Everyday a market commentator will explain why the Rand / Dollar exchange rate went up / down and / or why the stock market when up / down. If we can explain the movement then we think we are in control. Heaven forbid we face the reality that we may not be in control.
The biggest risk facing investors in 2015 is their instinctive need to do something.
Mcomm, CFP®, HdipTax
T. 021-851 3746