Fear is loud, and love is a whisper - why emotional decisions can lead to bad investing

Investing principles, investing, in the media

Fear is loud, and love is a whisper - why emotional decisions can lead to bad investing

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3 minute read

It may appear odd to start 2018 off with a blog that opens with the word ‘fear’, but there is meaning to our madness.

Fear is loud. It grabs our attention on purpose. It probably dates back to our Neanderthal days – an erupting volcano, thunder, a tumultuous waterfall, the roar of an angry beast. Best run for cover and hide.

Marketing types and politicians also love fear, as does the tabloid press. Because fear sells. The more fear the better. Fear equates to attention.

It is said that we all have three primal triggers: fear, greed and love. How do these primal triggers make us act when it comes to our own personal financial wellbeing over the long haul?


Fears can be real, but it helps if they can be conquered. Firstly, fear is an emotion and is typically triggered by the impact of an external source upon us. A commonly held fear is that if you invest at the wrong time in the wrong thing, all your money is lost forever. The antidote to this ‘imagined’ loss may be to hoard cash in deposit accounts. It is true that sometimes the media does report instances where a real loss does happen, as with the Bernie Madoff scandal which after all was proven in court to be fraud on a huge scale.

If you have time to take a breath, get a second opinion or ask a professional, you will find that the innate fear of total loss is an extremely rare event for the average investor. You are now in the calm realm of facts and evidence, with some common sense thrown into the mix.

Fear also has a focus at the beginning of investing; the “better to be safe than sorry” anecdotes. What is often overlooked, and can have a huge consequence, is that your future life goals and ambitions may be thwarted by the ‘run for the hills’ approach, meaning that later in life you don’t have sufficient wealth to live out your dreams. And then remorse and regret kick in.

At Capital, we adopt broad global diversification as the bedrock of our Intelligent Investing portfolios. Each portfolio will hold over 7,000 company shares and government bonds. On rare occasions, we are asked…” But what if Marks & Spencer goes bust?” and we are able to show that the M&S holding accounts for a mere 0.0696% of Capital's 60% growth portfolio.

This form of ‘evidence-based investing’ is the direct opposite of the approach taken by the large discretionary fund managers and investment banks, who preach individual stock selection (buy Tesco and sell J Sainsbury) and market timing (now is the perfect time to invest in India).

For these institutions, fear equates to action, and action results in trading, which leads to charges and commissions taken from your account.


Greed is a tricky topic to discuss with clients because as with Oliver Twist, the “Please Sir, I want some more” approach is extremely common. This is natural because we know that over the long-term, inflation will erode the buying power of our money. We need to add the effect of taxation onto any returns you get as well because, let’s face it, we spend with ‘net’ money.

In our experience at Capital, people find it hard to define with any degree of accuracy or clarity what ‘more’ actually means and, to add to the mystery, find it difficult to rationalise when the ‘more’ is needed and why.

We do meet some clients who already have enough to live the life they want, or their dreams, straight away. They just didn’t know and hadn’t been through our forward-looking FutureMap process.

Other people already have more than enough money to live safely and comfortably and want us to help them plan so that their children and grandchildren get their money when they have died. These people aren’t aware that they can give generously now, without waiting, and have the joy of ‘giving with a warm hand instead of a cold hand’ and making a difference tomorrow.

In each and every case it makes sense to revert back to the world of facts and evidence, with common sense thrown in. It always starts with the client though, and how they can envision and explain what it is they want from life, and when. It might be luck but, so far, we haven’t had to deal with a truly greedy client; the one who wants ridiculous returns each year; the one who wants esoteric and exotic non-mainstream investments purely for the excitement and potential returns; the one who wants to hold their wealth in shady offshore tax havens. They are not for us.

All the Capital portfolios are designed to beat inflation over the long-term after charges.


This third emotion is the everlasting strength and the backbone of all the best planning that we do together. The emotion that brings smiles, fun and laughter to our meetings. The joy of doing the right thing.

People truly love their friends and family (we have to accept that there are rare exceptions to this) and others love to give, support and volunteer to favourite causes. There are few cases where this passionate emotion can’t move mountains.

Funding mum’s care home costs in the best local quality home; helping the next generation to buy their first home; funding a life-changing educational course for a family member; paying school fees in a special academy for a friend whose daughter has learning disabilities; the list goes on and includes good causes and charities.

Fear and greed can be emotional drains on the soul and produce negative outcomes. Investing and planning for positive and beneficial outcomes which can change lives for the better, as opposed to simply having a larger bank account than your neighbour, is what the best financial life planning can produce.

The next time that you sense fear or even greed creeping into your thoughts or conversations, take a moment to reflect and pause. It will be worthwhile.

At Capital, we understand that fear and greed can be overcome.


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