The Tinman's missing heart may make it hard to feel, but he'd probably do pretty well in the market, according to the Associated Press.
"I think the best investment strategy is to pick some stocks or mutual funds you like and stick your head in the sand and protect yourself form emotions that are gong to cause you to do stupid things," said George Loewenstein, a professor at
In a study conducted last year, Lowenstein and colleagues found that when it comes to making financial decisions, people with brain damage fared better than others. The study tracked two groups: "normal" people and those with neurological disorders that rendered them incapable of normal emotional responses. Subjects were given $20, and were told that they could choose to invest $1 in each trading round, or keep it.
Researchers found that the "normal" group invested in about 57.6% of the rounds and earned about $22.80, while the emotionally impaired group participated in 83.7% of rounds and earned, on average, $25.70.
"Normal people, if they lost money, they got discouraged," Lowenstein said. "If they won a few times, they got nervous that their luck wasn't going to hold out."
The same pattern is reflected in the real world, too, according to Gregg Fisher, founder and president of
"People tend to hold on to things even if they're not favorable investments. People put more value on things they already have," said Fisher.
Fisher also said that investors opt for the familiar, and are far more likely to invest in mutual funds or stocks they are familiar with or have a personal connection.
"Investors tend to favor the things we're all positive about," said Fisher, who compared Wal-Mart and Sears stocks. "The price of
Atlanta-based author and financial adviser Kay Shirley said that people allow their pride to impact their investments.
"There's this 'I'm different' feeling. People see mistakes others have made, and they think they're immune, or it's not going to happen to them," she said. "I advise my clients to, when they're considering an investment, double their emphasis on the negative and halve their interest on the positive, and see if their judgment would be the same," Shirley said.
"Sometimes clients get 'hot tips'--generally they're from a friend or a child working at a startup--and clients think whatever they hear is really going to happen. Sometimes they do, and even if clients buy at the right time, they don't sell and ride the stock down," she said.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
