Today’s Puzzle:

There’s a specific type of brain damage that eliminates your ability to feel fear. Surprisingly, this can affect your investing behavior. Dan explains.

(Click the featured times below to jump forward in the episode)

Puzzle Of The Week:

  • [3:30] – Join us as we play a game of choice and probability. 

Jigsaw Pieces:

[5:00] – It’s Harder Than You Think. 

  • (For this to make sense, listen to the [3:30] time stamp above) Logically, we should jump at the opportunity to play each round. The odds of winning and losing are even, but the reward for winning is greater than the penalty for losing. Therefore, you stand to make more than you lose, and even when you lose, you can regain your winnings. Seems simple, right? However, a research study revealed the Average Joe refused to play more than 50 percent of the rounds. Basically, as people lost a couple of rounds, they got scared and quit.

[6:38] –  Brain Damage And A Lack Of Fear. 

  • Here’s where things get interesting. Researchers had other groups of folks play the game. One of those groups featured people who had experienced a certain type of brain damage. Their disability left them with the inability to feel fear. As a result, they played the game 89 percent of the time, and they ended up with a lot more money. Finally, the third group of people also had brain damage, but they still had the ability to feel fear. They chose to play more than 60 percent of the rounds. Remember, logic says you should play every round. There’s only a 13 percent chance that you’re going to have under 20 bucks if you choose to play all 20 rounds (trust our math on this one). However, if you choose not to play every round, the chances of you losing increase. The problem is that most of us let our emotions affect our decision-making process, and only those of us without fear are able to make choices independently of our feelings.

[9:38] – Dan, What’s The Point? 

  • Investing works like this game. If you look at the history of equity markets, you’ll observe that gains are far greater than losses. Losses tend to be temporary, and gains tend to be permanent. Of course, you’re never guaranteed to make money, but it’s usually your fear that keeps you out of the market. Understand that usually, we get in our own way when trying to make a profit. We understand that you’re only human, and emotions are a good thing. You don’t want to be a robot, but that’s why your advisor is handy. Your advisor can help you to make objective financial decisions while accounting for your emotions.

Puzzle Solver Assignment:  

  • [13:08] – Play the game. More specifically, find someone who is unaware of the strategy, and observe them playing the game.

The Full Picture:

 

Free Stuff:

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Additional Resources:

The host: Dan Cuprill – Schedule A Time To Meet – Or Call: (513) 563 – 7526

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