You’ve probably heard people counsel: “You just have to control your emotions, and you’ll be a much better investor.” That advice is terrible.
Emotions contain information, and if you try to override that information by controlling it or ignoring it, you miss out on interpreting your lifetime’s worth of accumulated wisdom.
Recent technology has allowed researchers to peer deeper and deeper into the brain, and with that help, science has discovered something: “Emotions are your brain’s best guesses of what your bodily sensations mean, guided by your past experience,” said Lisa Feldman Barrett, professor of psychology at Northeastern University and chief science officer for the Center for Law, Brain & Behavior at Massachusetts General Hospital. In a BBC Science Focus story, Feldman Barrett said, “Your brain constructs these guesses in the blink of an eye—so rapidly, in fact, that emotions feel like uncontrollable reactions that happen to you, when emotions are actually made by you.”
In other words, the brain is not reacting to what is happening; it’s actually constantly predicting what will happen next, based on the sense data it is receiving, and then adjusts how you respond based on whether its predictions were accurate. It’s like an airplane autopilot that is continuously autocorrecting based on new data.
Three Strategies
Now, brain science is complicated and we don’t—and probably never will—have a complete picture of how it works. But based on the best knowledge today, here are three things you can do—and help your clients do—to better deal with your emotions so you can function at a higher level.
1. Ask yourself, “What am I feeling and why am I feeling it?”
This question was asked by hedge fund performance coach Denise Shull when she sat in with me for a March podcast.Rather than just suppressing the feeling or trying to rationalize or intellectualize away the feeling, (for example, the fear of the market going down) it’s best to “feel the feeling,” put the feelings into words, and then try to sort out whether the feeling is coming from unresolved psychology, relevant intuition or just incidental noise.
As Victoria Song, an advisor to firm founders and CEOs, said to me in an earlier podcast, “If you don’t feel your emotions, then the energy patterns get stuck and metastasize, creating dis-ease in the body, which becomes disease.” In a similar vein, Shull said, “If you suppress and don’t want to feel it, sooner or later you’re going to act it out. Period.”
When markets drop significantly, advisors often try to calm clients by showing them historical data about how the markets have responded/rebounded from past bouts of volatility.
But that’s taking an intellectual approach that avoids allowing your client to feel the emotions they’re feeling. The reality is, they didn’t get into that emotion through a rational understanding, so they’re not going to exit that feeling by seeing past performance charts.
If you don’t help them process those emotions and sort out what’s relevant and what’s just noise, they are bound to repeat or “act out” those emotions again.
How do you help a client process those emotions? In my podcast, Shull described how she coaches hedge fund managers to deal with their negative emotions so they don’t cause avoidable trading mistakes.