The Seven Deadly Sins... of Trading: The Importance of Emotional Motivators

The daytrading commericals are back, once again dangling the lure of easy money in front of the investing - and non-investing - public alike.

Past campaigns centered around how "easy" daytrading is - e.g, Stuart the office slacker, an infant in a crib. The message was, "if they can do it, you can too".

This campaign is kicking it up a notch. Not only is daytrading easy, it can make you rich. And not regular rich either, but sip Goût de Diamants champagne out of the Holy Grail while you and the Victoria's Secret 2017 Calendar models orbit the Earth in your private satellite zoo stocked with animals that have actually gone extinct kind of rich.

Check it out HERE.

Hey, I get the joke. And it's funny. His work is dull. His boss is an insufferable a-hole. It doesn't seem fair. DO something about it!!

HERE is another one. In this ad the "dumbest guy in high school"(and seemingly the biggest doofus) just bought a huge party yacht. He probably cheated off you in chem lab. You're BETTER than that guy. DO something about it!

But humor aside, this ad campaign points to an underlooked factor in investing success/failure - the emotional motivation.

And the seven deadly sins are not the healthiest motivators for investing/trading. (Or anything else for that matter.)

Remarkably, these commercial manage to check the box for all seven.

We will break it down, and the implications of unhealthy emotional motivations. But first, this fundamental truth about emotional motivators:

When people invest ther money, most believe they are investing for financial goals. But we also invest for emotional goals, and there is a hidden EROI (Emotional Return on Investment) that factors into our decision-making.

When both sets of goals are aligned, great. But when both sets of goals are NOT aligned, look out.

Because when push comes to shove, people will consistently serve an emotional need over a financial one. In fact, all financial decisions are attempts to meet emotional goals.

Recognizing this truth is the key to understanding, identifying and managing one's emotions in the investing process.

Next post we will break down how the Seven Deadly Sins effect investing/trading behavior.

In the meantime, be well.

And hey, let's be careful out there.

Frank Murtha, Ph.D.

Dr. Frankenstocks.

H/T to