Sometimes it really does seem like the stock market has a mind of its own. But we know better than that, right? Our minds are the ones that actually move the markets. That’s both a good and bad thing; we are human, after all. We all know that the human mind can get fogged with all sorts of nuttiness. So what sort of psychological make up makes for better stock pickings? The good news? Women investors on average tend to perform better than men. The bad news? We can get in our own way. Today, we have a special interview with MarketPsych’s Frank Murtha, a psychologist who is an expert in behavioral finance and the author of the book MarketPsych: How to Overcome Fear and Build Your Investor Identity, and we learn a mind game or two that could help strengthen our positions.
Sometimes it really does seem like the stock market has a mind of its own. But we know better than that, right? Our minds are the ones that actually move the markets. That’s both a good and bad thing; we are human, after all. We all know that the human mind can get fogged with all sorts of nuttiness. So what sort of psychological make up makes for better stock pickings? The good news? Women investors on average tend to perform better than men. The bad news? We can get in our own way. Today, we have a special interview with MarketPsych’s Frank Murtha, a psychologist who is an expert in behavioral finance and the author of the book MarketPsych: How to Overcome Fear and Build Your Investor Identity, and we learn a mind game or two that could help strengthen our positions.
Tula 00:01
What role does psychology play in investing?
Frank 00:05
It's massive. I mean, in my way of thinking, it's the most important aspect of investing.
Jen 00:11
Welcome to Women Take Stock. Today we're going to jump out of the market and into our minds, Well, not exactly. But here's the thing, everybody is different. So, how do our individual psychological makeups impact our investments?
JJ 00:24
It's tricky stuff. But we got to pick the brain of one of the foremost experts in the field of behavioral finance, which looks at this exact issue.
Dana 00:33
Exactly. Does your personality type set you up to beat the market or not? Stay tuned to find out.
Tula 00:38
But first, let's start the show. We are for friends all at different places in our financial and personal lives looking to pull back the curtain on the seemingly mysterious often testosterone driven world of stock investing
Jen 00:56
And it for women without business degrees can figure out the market as a side hustle. So, yep.
JJ 01:01
So, join us as we learn the basics, buy, sell, scratch our heads, hold our breath, exhale, commiserate and celebrate. Hopefully more of the latter.
Dana 01:12
Maybe we can even make a little or a lot of money doing it. And if money is power, we definitely want some of that too.
Unknown 01:19
And now, a disclaimer.
JJ 01:23
The WTS podcast and data products are created for general information purposes only. Visitors should not act upon this content without first seeking advice from a financial planner or tax attorney or some other relevant question. Any advice that might resemble a region is purely coincidental. Now I'm going to kick into the recap of the week. Right? Okay.
Tula 01:45
All right. So, you're just going to ask each of us what how we're doing?
Dana 01:47
I think you should just say, okay, recap of the week, election week.
Jen 01:51
So, recap of the week or historical context. It's election week, if there was ever a week when we needed to think about our own psychological makeup, it might be this one, or at least get therapy. I don't know. How are you guys doing? I'm a little bit stressed
Dana 02:06
Therapy sounds like a good idea.
JJ 02:10
This JJ here, and I felt like the excitement and panic and everything that everyone was feeling about the election, the way it bled over into the market. I had to keep that from bleeding over into me. And keep from thinking, oh, I've got a buyer, oh, I've got a seller, oh, I've got to do X,Y,Z
Dana 02:31
I'm actually really surprised that it's generally been positive, and then up. And this is midweek election week. But I really expected the whole market to just completely tank and everyone to just completely panic. When you think about it psychologically. It's really interesting to think God, what is everyone who's investing thinking that it's going up?
Tula 02:49
No, I was looking at certain sectors thinking like, who makes Xanax? And is that going to go up? And who makes that alcohol.
Dana 02:57
To your point about alcohol? A couple of my favorite alcohol-oriented stocks are pretty high.
Tula 03:05
That does not surprise me.
Jen 03:06
JJ? What was it like in London?
JJ 03:08
It's interesting how people here are really focused on the US election. And there's lots of speculation as to what's going to happen with our trade agreements and what the relationship is going to be like, because Boris Johnson, the Prime Minister has spent a lot of time romancing Trump and his administration, and that there are quite a few things that will be up in the air and up for debate within third interesting for me is that we're still newbies in this world of investing. And we're still learning a lot. And it actually became a very nice distraction for me this week, okay, it's good to have no distraction when the distractions are all going positive. But it's been really fun. I'm like social media, almost.
Dana 03:51
What do you mean, just the sort of addictive element that speaks to our episode? You know, there's a comfort zone for you this week, right? It's checking your stocks. It's almost
Jen 04:00
It is like ice cream.
JJ 04:03
There's So, much talk about sentiment. And that's one thing I feel like being in a different time zone and based in a different country right now is that they're a bit more dispassionate in terms of the way people are looking at not only the politics, but what's going on in the market. But you still have that sentiment. That means either the stocks are going up or going down after-hours trading. It's crazy, just how much volatility there is.
Jen 04:28
You know, talking about things that are crazy. We hear a lot about the psychology of the stock market or stock market psychology, like the market is a real person with a brain or something. And even though Dana has a degree in psychology, and Tula has written quite a bit on the topic, we figured it might be a good idea to speak with an actual expert in the niche world of investing psychology.
JJ 04:50
A few days ago, Tula and Dana spoke with Frank Murtha, a psychologist and behavioral finance expert Frank's the author of market psych how to overcome fear and build your investments. identity. I'm a co-founder of market psych, a company that applies behavioral economics to their clients investment outcomes.
Jen 05:07
So, JJ you and I weren't a part of this conversation. So, I'm excited to sit back and just take a listen.
JJ 05:12
Yay.
Tula 05:14
Hi, Frank. I'm Tula Welcome to Women Take Stock.
Frank 05:17
Thank you very much excited to be here.
Dana 05:19
And I'm Dana, we are So, excited to have you here.
Tula 05:22
We are just getting our feet wet in the investment world. And we've been trying to become our own experts and educate ourselves. But we're very excited to have you as an actual expert to help illuminate some of this for us. I'm just curious how you got into this field.
Frank 05:40
My training is, as a psychologist, I worked with all sorts of age groups. And I went and got a doctorate at the University of Buffalo. And I realized about halfway through my program that I probably was in the wrong business. If you've ever been driving down a highway, and you figure you've already missed your turn off, you have two options, you can either make a U turn, go back and find that exit ramp, or you can keep driving and get off at the next exit. And So, that's what I decided to do.
Dana 06:09
That's a great analogy.
Frank 06:11
Thanks. Yeah, this was in the late 90s. The late 90s were a wild time. And I think the time when investing really began to go mainstream. You remember those?
Dana 06:20
The Wolf of Wall Street, right? Yeah. Oh, gosh,
Frank 06:23
yeah, it was. It was, it was crazy. The general public became interested in it. It wasn't some obscure field for people who smoke cigars and wasn't weird like that. It was TD Ameritrade where there's literally a baby telling you how to invest in the commercials. So, I got interested around that time, and I caught the bug, I guess I just found the psychology of investing fascinating. And it made me want to apply what I've learned as a psychologist in that field.
Tula 06:50
So, speaking of what role does psychology play in investing?
Frank 06:55
It's massive. It's the most important aspect of investing,
Frank 07:05
Education and data analysis of investment are both very important. You can have lots of knowledge and still struggle with investing if you don't appreciate your own motivations, your own emotional responses. One of the weird things about investing is this, I think, I use a lot of analogies, you've been warned, go for it is investing and getting into financial shape, a lot like getting into physical shape, right. If you want to get in physical shape, you know that you know, how you eat, how you exercise, how you take care of yourself, these are all things that will lead to success. And we all pretty much know what we need to do eat healthy exercise, and you'll get the results you're looking for. So, I believe that I jump in and just
Dana 07:50
kind of mimic and mirror what you're saying. I think with my cohosts, I talked to them originally about the idea of learning to invest, paralleling and learning a foreign language, or like going or even gambling, like Las Vegas, like you wouldn't just walk in there not knowing what games exist or how the game played. And same with a foreign language. Like there's a certain amount of research involved. And especially with gambling, there's this, you know, heightened sensitivity and anxiety that you have to like, really get your head around before you jump into that arena. And if you don't forget, I agree
Frank 08:23
with you, I actually did my dissertation on gambling. That's how I built the bridge to more traditional investing. There's a lot of parallels, actually. And having that knowledge of, for lack of a better word, the game is really important. But when it comes to getting into better financial shape, I think you only need to know a handful of good principles. But the key is, how do you follow them. There's So, many different things a person can do to be successful, there's a lot of right ways. But if you don't know yourself, and you don't know what works for you, you may find yourself trying lots of things and not experiencing the success you want.
Tula 08:57
So the first step is really to understand yourself, and that your fitness analogy rings true for me because you can know all the ways to eat right and exercise. But if you don't realize that you need to be in a group fitness class, because you need an instructor crack the whip, or you need flexibility, you have to see what works for your lifestyle, your psychology 100%.
Frank 09:19
100 %. So, you definitely need a level of knowledge, the more experience you can get. But knowing yourself is critical. We have to learn where our weaknesses are, what our strengths are, build a plan around those and there's an awful lot of right ways to do it. But for me, and it's not going to be surprising because I'm the psychologist guy. It starts with knowing yourself.
Tula 09:41
So give us a sense of what type of a personality trait would perform well or less well, is there any research showing that certain traits do better?
Frank 09:53
Yes, I've done some of it.
Dana 09:55
You have done some of the research...
Frank 09:59
You guys may be familiar with what's called the Big Five personality factors.
Tula 10:05
The consciousness, open mindedness, neuroticism and extraversion.
Frank 10:11
And agreeableness.
Dana 10:12
You speak my language. That's excellent.
10:14
Nice.
Frank 10:15
Here's the good news. Before we get into that, what we've learned is that any personality type can experience success. There are certain traits that lend themselves more easily to success. We've done some research into that and conscientiousness, versus spontaneity, right? The extent to which you are planful and goal focused, that can be very helpful as opposed to somebody who's more play by ear.
Dana 10:39
I think we've been talking a lot about how important research is in some of our thinking about investing. Like just don't do it blindly.
Frank 10:47
Yes.
Tula 10:48
So, are you saying just to clarify that somebody who is conscientious or somebody who is spontaneous, both have success for different reasons?
Frank 10:59
Without violating a confidence, I was friendly with a person in the.... Oh, now, this would probably be about 17 years ago, was the number one Portfolio Manager out of 11,000 funds, he had the best track record. And this individual was the most anxious, the most emotional, open minded, open mindedness, another one of the personality scales, not very open minded and he crushed it.
Dana 11:26
Wow.
Frank 11:27
Yeah, it's amazing.
Dana 11:28
He was spontaneous.
Frank 11:31
Yeah, he was spontaneous and there's also another scale that gets at your level of emotional sensitivity, specifically, the extent to which you're likely to experience negative emotions. How likely are you versus other people to interpret something in a way that makes you anxious, or discouraged, or you name it, and this person was off the charts? And he was one of the best investors I've ever known. Now, I don't think it's necessarily a recipe for success. We're talking about a professional here, who knew himself, knew the companies inside out. But he found a way to separate those qualities from his decision-making process, ultimately and he found great success.
Tula 12:07
Oh, that's fascinating. I love that. Because what you're saying is that your personality isn't destiny necessarily. It's not going to fate you to a good or bad outcome. It's really about learning to control those things.
Frank 12:19
That is absolutely right. When it comes to your personality, when you're talking about a goal directed exercise that involves calculations and you know, there's some math involved here, there's some planning involved here. People who approach investing in a haphazard way in which they don't understand themselves or what they're doing, find themselves in a situation. They're in a position, they're not sure why? They're not sure what would make them stay or leave? And as long as things are going up, the world is fine. It's just when you encounter that turbulence, when you encounter the volatility, all of a sudden, you lack the clarity and the conviction to make the decisions you want. So, there's a lot of elements that go into becoming a successful investor. It starts with reading and understanding what your options are, and how the process works. That's a big part of it. And the psychology, ultimately, that's the key. Because as long as you're working through the prism of who you are, and make decisions that makes sense for you, you're going to find success. There's a lot of roads that lead to success.
Tula 13:22
You mentioned this investor who is very anxiety ridden. Talk to us a little bit about what fear and anxiety does to your decision-making process and your critical thinking skills.
Frank 13:32
Yeah, fear and anxiety, I think are the dominant emotions. When it comes to investing. In the world of behavioral finance, there is a keystone concept called Prospect Theory. And Prospect Theory is a rather oblique way of saying that, "Fear is more powerful than greed", that we experience in losses more intensely and it has a disproportionate impact on our psychology and behavior, then do gains of the same amount. And they quantify this, they took a look at how a loss of X percent compares and its effect on us to a gain of the identical X percent and So, fear, unfortunately, is the thing that we have to learn to it. If not master at least account for when we're going through our decision-making process.
Dana 14:24
So, wait, you're saying that to cut it to sort of really basic levels, again, of $10, and the emotion of that versus a loss of $10, compared to the emotion of that the loss is greater. The loss is more painful than the...
Frank 14:41
Yes, that's exactly right. The great philosopher and basketball player Larry Bird once said, losing hurts more than winning feels good." And the same is true when it comes to our investing.
Tula 14:54
Okay, So, you just have to be aware that fear is a bigger driver of an emotion. Not...
Dana 15:01
So, it is about keeping it in check.
Frank 15:03
Yes, and there are different ways that we keep it in check. For one thing when it comes to managing one's fear, we know that we will get ourselves in a short-term perspective. And we're constantly being drawn into the short-term perspective as humans. It's really the price we pay for being human beings and being awake. And it makes sense we focus on the present.
Dana 15:22
And can I just illustrate a short-term perspective, that would be me, just now checking my chart on on my investment app, and being very focused in the fact that it's going down, versus I'm guessing the idea of, if I didn't even check that it's just I would have this general concept of like, Oh, I'm investing and my money is where it is right now, etc. And I would be much less.
Frank 15:47
So, I mean, I'm right there with you, Dana, I have to watch myself because I keep an eye on things and I think this actually points to the role of fear, and our emotions, as it relates to our access to our stocks and social media, these apps, it is So, easy. You can calculate your net worth at any given second. You can hit refresh and get a number that reminds me of the sort of things that pull people into casinos, honestly.
JJ 16:11
Yeah, there's the gambling.
Dana 16:12
Well, that's the question we have too, the parallel between, you know, addiction and gambling and investing.
Frank 16:19
Since you've helpfully open that can of worms, I will tell you that I studied gambling, I think that for a lot of people they're investing is a form of gambling and you can fall into the same destructive habits and traps that befall all sorts of Gamblers that you read about who have wrecked their lives. If you have an addictive personality and you don't watch what you're doing, you can really.... You can make some trouble for yourself.
Tula 16:48
And how do you avoid those pitfalls?
Frank 16:50
I will tell you this, I think one of the best ways to do that is to not.... I don't want to say not do it alone because we always have to make our decisions for ourselves, but involve other people in the process, it's a lot easier to wander off the path when you're alone. If you have somebody who's a touchstone, it doesn't even have to be somebody in an official capacity. It could just be a friend or somebody you talked to.
Dana 17:12
Yeah, that's one of the instigators of our connecting here and we've been having this conversation like no, this idea of FOMO, fear of missing out, it's like, are we supporting each other in our investments? Or are we being detrimental to one another?
Tula 17:27
Are we leading each other off a cliff? Because it's come follow me? Because we all bought Bitcoin last week.
Frank 17:34
You are asking some really good questions here. What I have noticed is that most people are much happier to share their successes, or failures. You know what, I don't think enough investors here. And my understanding that this is a podcast that is meant to reach out to people who have different levels of investing experience, but perhaps, people who don't have a lot, one of the things you may learn early on is that it's really fun. They don't tell you that, but it's fun.
Dana 18:07
There's a charge that goes along with it. I think we've learned So, much since we started doing this, it's really been exciting. Then there's also the side of like you mentioned, the social media aspect and this idea that you're missing out, this idea that everybody's doing it and you can go on Reddit and Facebook and everyplace else and talk about investments.
Tula 18:24
On that note Dana, the difference between what you said Frank about, "Don't go it alone". And then on the other extreme, oh my gosh, everybody's doing it, I'm going to do it right.
Frank 18:36
When I say don't go it alone. What I mean is, it is useful to have a trusted person who can give you feedback, listen to your ideas, listen to your concerns, and be able to hold up the equivalent of a mirror or share another opinion. And the person would need to be the sort of person who, you know has your interest at heart and is somebody with some experience and some worthy of trust because if you choose the wrong person, and it just becomes a matter, then all of a sudden start playing and...
Dana 19:10
Like Bernie Madoff, for example.
19:12
It could play on your Competitive instinct sometimes, ever seen these motivational posters? They're up in people's offices, like in probably in that show the office, but you know, perseverance
Dana 19:22
Is like a cat hanging out.
Frank 19:23
Yeah, just hanging in there like everyone says like, I saw what it says something like, perseverance. If you don't quit, you can't lose and I found myself thinking.
Tula 19:32
Yes, you can.
Frank 19:34
Yes, Tula. Absolutely, you can for one thing, but I'll tell you, a lot of people who go into this have a competitive drive, a lot of people I've noticed are former athletes or even current athletes. There's that aspect, they get juiced up on it but what makes somebody a wonderful tennis player who doesn't quit when they're down to sets and just plays every point the hardest, that's a wonderful trait in that environment but if you're the sort of person who can't expect a loss, investing is not a good idea for you, because you will hold that weight, and it will drop, and you will double down, it will drop and you're like, I'm not going to quit and next thing you know, you're at the bottom of the ocean holding some company you really didn't even understand in the first place, and half your money's gone. So, competitiveness is a wonderful trait. Leave that at the door, when it comes to your investing, you have to be really...
Dana 20:24
Like check your ego, right? Not wanting to be wrong about a stock buy, right? It's going to kill you worse than the stock going down itself.
Frank 20:36
There's research that's been done on men and women and how they tend to differ and I don't like to deal in generalities as a rule. But this is.....
Tula 20:45
Please do because that was one of our questions. Yeah, I don't know if there's a difference in the way they invest.
Frank 20:51
If you look at a big picture, there tends to be individually, people or individuals, there's a lot of in the big Venn diagram, there's a heck of a lot of overlap, of course. But one of the expressions that I've used is that women tend to be better at investing their money without investing their egos and that goes an awful long way because when you invest your money, you're not just investing your money, you're investing your hopes, you're investing your emotions, you're investing your ego a little bit, you're investing your identity. So, when that goes down, it's not merely that you're watching your money go down. You begin to feel maybe a little bit foolish; you begin to feel maybe a little bit inadequate, you begin to feel these emotions. And all of a sudden, you find yourself in a really tricky place because as long as one's emotional needs are consistent with one's financial needs, you're in a good place but what happens is, if the financial need differs, we default to our emotional need and I'll give you an example of what I mean, like you bought a new position, it's starting to go down, and a part of you because you've done your research and you made a plan. You say, you know what I got to get out of this position because it's not doing what I thought it would do. The story isn't what I thought, but there's an emotional need, which is in conflict but I don't want to be wrong, and I can avoid the pain of being wrong. If I just hold on and wait for it to break even just get me back to even that's all I ask and then I'll get out. That's letting your emotions rule your decision making. It happens all the time, and it happens to the best of them. And it's something to be aware of
Dana 22:32
Is, it happens to men more than women.
Frank 22:34
I believe it does. I don't actually have hard data to back that up but we do know that women tend to trade less, we know that women tend to be a bit more risk averse. I think it comes back to a bit of a sense of humility, and not assuming that you know, everything. And it's okay to be wrong. You know, it really takes ego strength to be an investor psychology term, it takes the ability to feel okay about yourself, and then not have a trade go the way you want but if you're the sort of person who is a bit more fragile with their ego, and it's really difficult for you to experience that pain that comes from feeling like you failed at something, my gosh, that is a huge warning sign. Is there a difference between men and women on that? I will leave that to your listeners to decide. But I can sense there's a lot of heads nodding right now.
Tula 23:28
Yeah, I think there's also the way that men and women are socialized and brought up to think of their identities as it relates to how much they make and their value as a human being on this planet.
Frank 23:41
It's important, and it's real, what you are describing, I work a lot with financial advisors. That's really who I work with the most and I have noticed a lot that financial advisors make a common mistake. They will work with a couple, let's just say it's a married couple, a man and a woman and they'll work with the man and they'll tend not to work with the woman and I know enough women in this business that they've told me that they've experienced that, they'll sit down and all of a sudden the head will turn to the male and they'll just start talking. I have opinions on this too. So, I think that does speak to a rather deep-seated pattern and paradigm that we've gotten ourselves into and you mentioned earlier, money, ego, how we're socialized, that definitely plays into it. And that's a shame, it is a shame for all of you [crosstalk]
Tula 24:35
I want to just loop back to what we started with when we were talking about the Big Five Personality Traits and I'm wondering if our listeners are curious how they can figure out which traits dominate their personality. Is there an online quiz or assessment tool that they can go to figure it out?
Frank 24:55
The short answer is yes. Any personality tool that revolves around what are called the Big Five Factors, also called the Neo Personality Inventory. If you take one of those tests, and they're out there for free. My company used to offer them. But I believe we took that offline. If you do, that is a wonderful first step, hopefully, among other steps, but if you do that, you'll begin to go. Okay, So, this is what it's saying about me. And what comes along with that. If you're the sort of person who is more spontaneous, it's probably good to recognize that may play itself out in your investing, you may be more tempted to go, you know what, I woke up feeling like buying the stock? I'm just going to do it toda or if you're the sort of person who has more anxiety, [inaudible 25:36] all right, I know that when I make these decisions, I may be experiencing a bit more fear, this is something I need to factor in. There's other traits like openness versus traditionalism? Am I the sort of person who wants to explore alternative investment strategies? Do I want to read about mining stocks in Brazil? Or maybe I should stick with my bread and butter a little bit? Because that's a better fit for who I am. The more you know about yourself, the more you put yourself in a position to be successful?
Dana 26:01
You know, we're talking about each of our different personalities. What about the concept of herd mentality that takes over when stocks tank or massively increase? Now, what are your thoughts on that?
Frank 26:13
Well, I will tell you, I've worked in this field for a while now and there is a very simple concept that we have all experienced and sometimes I bring it up in rooms with experienced investors ad I think they come around to seeing it my way. And this may resonate with your audience. It's peer pressure, to talk about herd mentality, I look at the driving force in markets as being quite literally peer pressure and what I mean is the same stuff that when you were a 15-year-old, and you found yourselves going along with things, and you found yourself making decisions that maybe weren't a good fit for who you were, but you did them anyway, because she felt this pressure. That's what happens in the market. Think of it, if you are an investor, other people who are investing are literally your peers and what makes a stock go up people like it, people like it, it puts pressure on buying it, they're willing to pay more and want to stock begins to go up. It comes in prominence. It has a track record, this becomes a good stock, more people will hate this is good. I want to buy this now.
Tula 27:14
So, stock market is basically popular giant high school.
Dana 27:18
Well, it's a giant high school.
Frank 27:23
I did a presentation called what high school can teach us about investing.
Tula 27:28
Wow
Dana 27:30
I have to Google that.
Frank 27:32
But how do you overcome that? You overcome it the same way you did growing up? The reason why it hits teenagers So, hard is because the developmental step for a teenager the ericssonian social psych question is Who am I? Who am I? You got to figure that out. And it's hard.
Dana 27:47
So, "Who am I" as an investor,
Frank 27:49
Right? So, once you figure out who you are, you can overcome peer pressure and go you know what? I know everybody wants to invest in this thing. But yeah, I can think for myself, it's the same thing that made me ride my bike off a cliff. When I was 16 years old. I didn't want to I didn't want to look like a wimp. So, I rode my bike off a cliff. The dumber decisions I have made. [crosstalk] It's the same as investing, it's all peer pressure. See that I have to watch out for, and I think a lot of people do is to not be impulsive and if there's a position that you want to enter, and all of a sudden, you feel like a wave of emotion going, I just need to get into this right now. If you haven't thought it out ahead of time, and you didn't plan for it. It'll be there tomorrow. Really, it's not like if you miss a bus, you're never going to get to that you just catch the next bus, there's a bus coming every 15 minutes, you don't have to catch all of them. And sometimes we put this pressure on ourselves to catch them. And it can feel like you Oh, I missed that one and now, I have to try twice as hard to make up for that and redeem myself.
Dana 28:47
It's like stepping back and saying that big picture, instead of being caught up in that moment, close in stepping back and recognizing that stock markets been here for decades. It's still here right now.
Frank 29:00
100%, there's an important distinction that I'd like to make, there is a difference between trading and entering in and out of stocks, which can be a wonderful thing and investing for the long term and what I would say is, if you have these emotional needs, like a lot of us do, maybe to do both of those things, segregate those accounts. Okay, you can have your play account, for lack of a better term, speculative trading, but if you want a sound financial future, you really almost want to do the opposite. You just want to buy things that are steady, long term. Don't touch them too much. So, it's possible that a long-term perspective for part of your portfolio and then dose that part of you that wants that short term perspective, but if you don't understand and segregate those things, it's called mental accounting and behavioral finance. If you don't have separate mental accounts, it can all become a big pot and it all gets mixed up and the next thing you know, you're making a hash out of your portfolio and you're doing things you never intended to.
Tula 29:56
That's great advice. So, if you're going to buy bitcoin, it may at midnight like we all did a week ago, that should come from our play account.
Dana 30:05
Not from our long-term investing account.
Frank 30:09
Yeah, absolutely, Bitcoins a great example, Bitcoin is something else.
Dana 30:14
Frank, I feel like I could just talk to you for hours, hours and hours but our podcast is only 39 minutes, or whatever it is. But thank you very much for all of your time and your insight. It's really fascinating to talk to you.
Frank 30:28
I think it's great that you're doing this podcast. So, Best of luck to you and your listeners.
Tula 30:32
Great. Thank you, Frank.
Dana 30:33
Great, thanks So, much. Thank you.
Jen 30:35
I don't know JJ, what about you, I'm sort of jealous, that would have been a fun conversation to have been a part of.
JJ 30:41
I'm really interested to hear what Tula and Dana, have taken away from this?
Jen 30:47
You guys had a few days to digest your conversation with Frank and I'm just curious, just this week, when you were looking at your own stocks in your own investing? Did you think about things differently than you might have? Had you not spoken with him?
Dana 31:00
Yeah, Jen, I actually I held a lot of my portfolio more than I have, in the past few months, I thought about my plan and I held on to several positions that were actually going down, and let them creep back up word and I'm really happy that I did that. It was like I sort of stepped back, even though I really believe in these two particular companies, they were going down, but I held on to them because of some of the conversations that we had with Frank.
Tula 31:31
He got into your mind. I'll tell you, the thing that I think hit me the hardest about that conversation, in a good way, was his analogy about the bus and the bus stops because this whole week, I haven't really had a chance to check the stock market that often because of all the election craziness and I keep worrying, Oh, my gosh, I'm missing out on some great opportunity, because I'm not paying attention but his idea about there is going to be another bus coming along, helped call me and recognize that I can, you know, jump back in next week, and there will be other buses, there will be other opportunities.
Jen 32:07
Right. They know what about you,
Dana 32:09
I really appreciated the analogy to a high school, the stock market being a high school, I understand the concept better now fear of missing out and what that peer pressure does to the entire market and what it does to you personally. So, it's about finding your own identity, being secure with yourself, which is part of your growth and high school, hopefully, and taking the chances that you need to take for yourself and not necessarily always listening to everyone else and being pressured into making a stock buy. What do you think, JJ?
JJ 32:37
I really connected with this overall idea of the psychology and I feel like that's what we're actually talking about in women take stock, there are these barriers to entry and So, many of them are psychological, especially for women. I don't know enough. I've missed out. I'm too late. I'm too old. Everybody knows more than I do. I'll be that the rite of vesting is for men. Yeah, exactly. It's all those psychological elements, I could never understand it. I'm not good at math, like rb, we don't often talk enough about those things and it's exciting to really address them head on.
Tula 33:14
I totally agree. I think that it gives you a sense of empowerment and I love what he said about the differences between women and men and of course, everybody's an individual. But this idea that women actually have, maybe he called it humility. I don't know what other psychologists would call it but that we actually do pretty well. When we dive in.
Dana 33:40
And when we support each other, when women support each other, that's really beneficial to greater outcomes. So, here's the question Tula, I think you set up a quiz for us this week that kind of bounces a little bit off of this very conversation. You want to kick us into it?
Tula 33:55
Sure. So, our quiz of the week I've got two questions for you their true false. The first statement, you have to tell me if you think this is true, or false. Positive emotions, such as excitement, make people more confident in their ability to evaluate investment options?
JJ 34:15
Should we answer the first one first?
Tula 34:17
Yes.
Jen 34:18
I feel like it's a trick question.
Dana 34:20
I think that's false.
Tula 34:21
Okay, so Dana says false.
Dana 34:24
Yeah, false. Sorry. Sorry. I was going to say it. Yeah, it probably does make them more confident, but it doesn't necessarily make their investments more successful.
JJ 34:34
Don't change the question, Dana.
Dana 34:36
No, I'm not. I'm actually reading it differently. So maybe I'm misunderstanding as I'm saying.
JJ 34:41
I think it's true.
Jen 34:43
You think it's true? Tula?
Tula 34:45
Okay, drum roll is true. Research shows that positive emotions such as excitement, make people more confident in their ability to evaluate investment options. Okay, and I'll explain that in a second. Now your Here's your second true or false question. True or false. Positive emotions make people more likely to take risks with investments. True or false?
JJ 35:11
I go with true.
Jen 35:13
That's true.
Dana 35:13
I don't know. It's true also.
Tula 35:15
Okay, you're all correct, it is true and what's so fascinating to me about this research is that the negative emotions, like anxiety and fear, make us less likely to take risks and make us less confident, whereas positive emotions like excitement, and joy and happiness, make us feel more confident and more likely to take risks. Now, this isn't necessarily a good thing.
JJ 35:43
I was going to say, it could make you take some stupid risks.
Tula 35:46
That's true and what's even more interesting that this is based on a study that was done by Camellia Coonan and Brian Knutson. They're both masters of psychology, and neuroscientist and what they did was they took 28 undergraduates and they gave them like 90 stock questions that involve rewards and dividends. Then they showed them these pictures to induce emotions and they found that the people who experience positive emotions continued to ignore new information that would have changed their decisions, because they liked hanging on to that positive emotion, because they're blissfully ignorant and they were trying to reinforce those positive feelings of confidence and excitement. Even when they were given information. That was objectively they should start feeling fearful, they should start feeling anxiety ridden, and they should actually stop taking the risks. They liked feeding themselves with the positive emotions. So that's something we should all take into consideration, then.
Jen 36:56
Does this mean that depressives, people with depressive personalities perform better in the stock?
Dana 37:02
Maybe that's true.
Jen 37:03
May be more cautious, but they'll perform better.
JJ 37:06
Hey, guys, so I don't know whether or not I want to wish you guys a happy week or you know, a depressing one because I want you all to do well in the market, but I want you to be happy too. Mm hmm.
Tula 37:15
I think there's a you can find a happy medium, especially if you learn who you are, psychologically, and take that into consideration.
JJ 37:24
We are going to push out in our social media accounts, perhaps a couple of links to some fun personality tests you can take to figure out who you are for your own investing purposes.
Dana 37:33
Follow us on Twitter, Instagram, and our website at Women Take Stock. The website is womentakestock.com.
Jen 37:40
And on that note, I'm going to wish you guys a happy week
JJ 37:44
but like not so happy that you're delusional. Happy ish….