WE all know going to the supermarket when we are hungry means we will probably buy more food than if we shop on a full stomach.
Similarly, emotional experiences - even relatively insignificant ones - can affect our investment and other financial decisions, and therefore our results.
Researchers at Stanford University showed pictures of exciting images to people. Those visuals stimulated action in the area of the brain associated with risk-taking.
In theory, when those people then made financial decisions, they were more likely to choose risky options. On the other hand, show people scary images - perhaps spiders and snakes - and that will affect the part of the brain dealing with safety. These people would likely then tend to choose safer investments.
When people feel sad - in a Harvard study they were shown tear-jerker film clips - they place less value on their own assets.
Commenting on these findings, the website www. advisor.ca noted trivial events like what people read in the newspaper, recent conversations or even what they had for breakfast can affect their ability to make appropriate financial decisions.
The website also quotes Michael S. Falk, a partnering consultant for Focus Consulting, saying people are affected emotionally and intellectually through sight, sound, touch and smell, through their experiences even before reaching the office every morning. Falk notes in the online story that our senses prime us to lose or gain confidence, and affect our ability to make decisions.
When people are emotional, they risk making decisions inconsistent with their long-term objectives.
The website www.advisor. ca cited Falk's suggestion to create "if-then" decisions: You decide, before you invest, what you will do in any given situation and where your investments may lead you, to avoid decisions affected by emotion.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. Contact him at mike@grenby. com. Chartered Accountant Fellowships Awarded
A number of North Shore chartered accountants were recently honoured with a fellowship by the Institute of Chartered Accountants of British Columbia.
A press release from the organization noted the fellowship is awarded to chartered accountants for contributions to the community and service to the profession. The following is a list of the recipients: Eric Carlson, Bev Park, Claude Rinfret, Ian Telfer, and District of North Vancouver Mayor Richard Walton. For more information visit the website www.ica.bc.ca.
