Envy the irrational emotion

People don't necessarily feel better or happier when they have more money - they feel happier when they have more money than their friends and neighbours. Psychologists have shown that we are happy when we get a 5% salary increase... that is, until we learn that our peers all got 7% and we turn distinctly unhappy. As William Shakespeare said, "But, O! how bitter a thing it is to look into happiness through another man's eyes!". If our stock portfolio is achieving the long-term goals we have rationally set, let us be thoroughly happy for ourselves as well as anyone fortunate enough to outperform us. Investing is not a zero-sum game, so the happiness and success of our friends is not directly to our detriment.

- Prof. Sage

Rational decisions and emotions

Fear and greed press internal buttons that suggest action, and such action is almost always contrary to your long-term best interests. The instant gratification of acting in accordance with our emotions is sometimes almost impossible to resist. In the long-term we're all dead anyway, our mind tells us, searching for every possible justification for altering or ignoring our rational goals. But then Homo sapiens are not exactly famous for being rational. People refuse to drink juice from a new urine collection bottle. People won't eat soup that was stirred with a new comb or flyswatter. Few people will eat fudge or chocolate when it is shaped like dog feces. None of these rationalisations make sense. And neither do most of investment decisions when they are driven by emotions.

- Prof. Sage

Conflict of Emotions and Goals

Emotions create a sense of urgency that draw our attention away from long-term rational goals in order to avoid or pursue what is perceived to be a more pressing hazard or reward. My long-term goal may be to be faithful to my wife, but when the attractive young girl across the table takes off her shoe and runs her toes up my leg with the seductive smile and wink - very strong emotions suggest short-term actions that would be contrary to my long-term goal

- Prof. Sage