Blog Glob: "Achieving Happiness: Coping with the economic crisis"
Excerpt from "Achieving Happiness: Coping with the economic crisis" (HometownAnnapolis.com):
The economic disaster we're witnessing has struck fear in the hearts of most of us.
Watching the banking system break down and our individual investments plummet has been downright scary. Fortunately, recent research in "neurofinance," which is the fusion of neuroscience and psychology, offers effective strategies for investors who are trying to cope with this crisis.
The panic that has been pervasive in the markets is being driven by how our human brain functions when we sense danger. We have a "loss avoidance" circuit that's activated when we're dealing with a real or potential loss. Stress hormones and neurotransmitters are released that have a major impact on our mind and body.
...
If our body doesn't burn off the stress chemicals through a physical reaction, they accumulate to the point we experience panic. Feeling a high level of distress directly influences our thinking,
Watching the banking system break down and our individual investments plummet has been downright scary. Fortunately, recent research in "neurofinance," which is the fusion of neuroscience and psychology, offers effective strategies for investors who are trying to cope with this crisis.
The panic that has been pervasive in the markets is being driven by how our human brain functions when we sense danger. We have a "loss avoidance" circuit that's activated when we're dealing with a real or potential loss. Stress hormones and neurotransmitters are released that have a major impact on our mind and body.
...
If our body doesn't burn off the stress chemicals through a physical reaction, they accumulate to the point we experience panic. Feeling a high level of distress directly influences our thinking,
judgment and behavior. As the panic part of our brain takes control, we become increasingly cut off from other parts that permit logical thought processing. As our threat level intensifies, we're driven to do almost anything to alleviate our discomfort, even if it's not rational.
The consequences of this phenomenon have been described by Richard Peterson in his book "Inside the Investor's Brain: The Power of Mind Over Money" (Wiley, $60). "Fear is uncomfortable, and it can drive investors to make rash, often poor, financial decisions,'' he writes. ''Fear can be so overwhelming that it overrides reason, patience, and good judgment. Among investors, intense fear often leads to panicked selling."
...
To get through a slumping market, Dr. Peterson recommends following these strategies:
The consequences of this phenomenon have been described by Richard Peterson in his book "Inside the Investor's Brain: The Power of Mind Over Money" (Wiley, $60). "Fear is uncomfortable, and it can drive investors to make rash, often poor, financial decisions,'' he writes. ''Fear can be so overwhelming that it overrides reason, patience, and good judgment. Among investors, intense fear often leads to panicked selling."
...
To get through a slumping market, Dr. Peterson recommends following these strategies:
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