Free Wealth Management Guide Investing Proceeds From the Sale of Farm or Ranch | Page 5

Emotions and Investing
Emotions typically play a destructive role in people’s
investment decisions. Benjamin Graham, often referred
to as the father of investing, once said, “The investor’s
chief problem and even his worst enemy is likely to be
himself.”
Behavioral Finance is a field of study that applies psychology to investing. It attempts to explain the role emotions play in investor’s behavior. The overall theme found
in Behavioral Finance research is that people’s brains
are “wired” to make costly investment mistakes. A key to
successful investing is to adopt a disciplined investment
approach that replaces emotion with a proven, rational
process.
The Cycle of Market Emotions shows the emotions people
often experience when investing. Basing investment decisions on emotion often leads to investors buying high and
selling low.

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