05-01-2014, 06:44 AM
Great topic, Dan.
I completely agree that "removing emotion" from any decision is physiologically impossible, and probably completely undesirable. Emotion is an integral part of what our brain does as part of its processing, and we cannot choose whether to turn it on or off.
I think that when people say don't let emotion dictate your stock decisions, it is just a shorthand way of saying that it is imprudent to trade based on price movements alone (or primarily). If you own a stock, a big drop in price can feel scary, and a big run-up in price can evoke giddy feelings or maybe even greed. But alone these are not good reasons to sell. Other factors are more important (valuation, time horizon, reasons for the movement, etc.).
But as you rightly illustrate, we use emotion in almost all decisions. I know that I am very brand-loyal and brand-aware, probably due to the tireless work of the marketing companies to prey on my subconscious and emotions. I own KO, and will likely buy PEP when the price gets to a good range, but I am doubtful I'll even own DPS. On paper it is comparable, and perhaps in some ways even stronger than the other two. But I personally don't care for their stable of drinks. Is that an "emotional" mistake? Maybe. But I'm comfortable with it.
I completely agree that "removing emotion" from any decision is physiologically impossible, and probably completely undesirable. Emotion is an integral part of what our brain does as part of its processing, and we cannot choose whether to turn it on or off.
I think that when people say don't let emotion dictate your stock decisions, it is just a shorthand way of saying that it is imprudent to trade based on price movements alone (or primarily). If you own a stock, a big drop in price can feel scary, and a big run-up in price can evoke giddy feelings or maybe even greed. But alone these are not good reasons to sell. Other factors are more important (valuation, time horizon, reasons for the movement, etc.).
But as you rightly illustrate, we use emotion in almost all decisions. I know that I am very brand-loyal and brand-aware, probably due to the tireless work of the marketing companies to prey on my subconscious and emotions. I own KO, and will likely buy PEP when the price gets to a good range, but I am doubtful I'll even own DPS. On paper it is comparable, and perhaps in some ways even stronger than the other two. But I personally don't care for their stable of drinks. Is that an "emotional" mistake? Maybe. But I'm comfortable with it.