It doesn’t matter how intelligent you are – what matters is how capable you are at making rational decisions in the midst of emotional turmoil.
Pablo was a client of mine who called me up during the pandemic and asked me to sell his portfolio. I talked him out of it… for a day. Then he called and no matter what I said or did, he was not budging from his decision: “Joyce, nothing you say will make me change my mind. I’m telling you to sell it now”. I used my stock market facts, historical charts and the financial plan we had worked on… to no avail. Pablo had made up his mind.
Fast forward a year later, Pablo called me and said “I should’ve listened to you”. Yes, you should’ve Pablo, but the issue is that emotions are what drives behavior for humans because we are led by the amygdala which processes fear, threat, and stress responses fast, often before your rational brain even catches up.
How do you stop that? Understand that making irrational decisions is NOT a one time deal, it’s a habit. Pablo had habitually made quick decisions based on emotion vs. logic. If you do it for any other part of your life, you’re certainly going to do it in finance.
So slow down. If you know you’re a nervous Nelly, make a promise with yourself to run important decisions by 3 people you know and trust. Or to hold off on a big decision for 3 days.