Worrying Makes You Smarter
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Embracing stress improves our ability to concentrate and make decisions. The value to advisors – and their clients – is obvious.
The investment markets are ruled by greed and fear. Our behavioral tics impede our ability to make rational investment decisions. This is as true for advisors as it is for clients – although we assume that advisors are more skilled at restraining their impulses. But when asset markets enter a period of volatility, as they have done this year, how much worry, greed or fear is healthy?
Any emotion has healthy aspects. We tend to think of greed, for instance, as morally suspect – but it can be a tremendous motivator for success. The same is the case for ambition: It drives us to improve ourselves, to innovate and to enhance life for our families. Fear leads us to be vigilant, to use caution, to protect ourselves as well as others around us.
As advisors, we often counsel clients to dismiss their emotions, or at least to discount them. But that may be the wrong advice. It could well be more productive to embrace our emotions, particularly the negative ones. Take, for example, worry. Often thought to be the bane of investors, worry can be a positive emotion. According to a 2010 study by four U.S.-based professors, “the act of worrying is sufficient to facilitate an attentional bias to threat.” In other words, people who are worried are more successful at detecting threats.