Sad People Make Incredibly Poor Investments

By SiliconIndia   |   Monday, December 10, 2012
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Bangalore: Your emotion does influence your decisions but you may ask how it will affect your investment, because never even in your dreams you would like to lose money. You will be surprised to know that the extent by which sadness or a depressed mood can affect your wealth and your investment ideas is actually awful. Researchers from Columbia University have discovered a stronger link between sadness and poor financial decision-making, says Mandi Woodruff from Businessinsider.

The professors of Columbia University had conducted an experiment in which some participants were randomly assigned to view a tear-jerker video.

More: 5 Places to Lock Your Money Instead of Banks

Following the experiment, groups of participants were questioned about different investment options they may choose - for example, would they favor an investment that generated quick gains, or wait to invest if there was any probability to earn more over a longer period of time?

The twist was that, some participants who had watched the tear-jerker video before the Question & Answer session, displayed impatience and myopia, which was evident in their financial decisions, as they showed more interest in choosing investment options which will produce higher returns in the short term, but lesser gains over the longer term.

“These experiments, combining methods from psychology and economics, revealed that the sadder person is not necessarily the wiser person when it comes to financial choices,” the Author concluded.

Also Read: Make Money the Billionaire Way


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