Why Smart People Make Dumb Money Moves (And How to Avoid Them)

Dear Fellow Investor,

Let me tell you about my dumbest investment move ever. In 2021, I watched a stock rise 40% in two days. Instead of sticking to my research process (you know, the one we talked about last month), I panic-bought near the peak. Why? Because I was afraid of missing out. Spoiler alert: It dropped 60% over the next month.

Why Our Brains Sabotage Our Investments

Turns out, our caveman brains aren't wired for investing. Here's what we're up against:

1. Fear of Missing Out (FOMO) When everyone's making money except you, your brain screams "JOIN THE PARTY!" This is why people buy at peaks and create bubbles.

2. Loss Aversion We feel losses twice as strongly as gains. This is why you might:

• Hold onto losing stocks too long

• Sell winners too early

• Check your portfolio 17 times on red days

3. Confirmation Bias Once we buy something, we only want to read good news about it. I once held onto a failing stock because I only read positive Reddit posts about it. (Yep, that hurt.)

How to Hack Your Brain

Here are the strategies I use to fight my own psychology:

1. The 24-Hour Rule Never buy anything without sleeping on it first. Those "urgent" opportunities? They're usually not that urgent.

2. The Devil's Advocate Game Before any investment, I force myself to write down:

• 3 reasons why this investment could fail

• What the smartest critics are saying

• Why the current price might be too high

3. The "Already Lost" Mental Trick When you buy something, pretend that money is already gone. It helps you:

• Think more clearly about when to sell

• Stop checking prices every 5 minutes

• Make decisions based on facts, not fears

Real-World Emotions vs. Your Strategy

Here's what typically happens to investors:

• Market up 20%: "I should have invested more!"

• Market down 20%: "I should sell everything!"

• Sideways market: "I'm bored, let's trade something!"

The solution? Write down your strategy when you're calm, and read it when you're not.

My Personal Checklist

Before any investment move, I ask myself:

• Am I acting on strategy or emotion?

• Would I make this same decision if the market was closed for a week?

• Can I explain this move to someone else without feeling embarrassed?

What's Next?

Next month, we'll explore portfolio rebalancing – because sometimes the hardest part isn't picking investments, it's maintaining the right mix over time.

Keep ascending,

Cash

DISCLAIMER: InvestorAscent provides educational content only. This is not financial advice. All investing carries risk of loss. Always do your own research and consult qualified financial professionals before investing.