Running on your Gut: Risky or Rewarding?

It’s been a long-standing debate, the validity of emotion over logic, or otherwise.

What guides you, your gut, or your trusted financial advisor (who might also be running on the gut)?

The financial markets come independent of manuals or guides, commandments instructing you on decision-making pointers, how to build a portfolio, how to make your investments solid, or when to make investments. Words set in stone that promise that if followed precisely, we’d all have a chance at being the oracle of somewhere, how lovely it would be to have a shot at being the next Warren Buffett.

Financial market indicators

However, there are no promises in this industry, past success isn’t an indicator of future success. Investors rely only on the proven tactic man has come to accept; accelerated heart rate, sweaty palms, and non-evident fingernails, investors have come to build their own manuals with gut feelings and time. Subtle indicators that sometimes yield positive outcomes.

The price of Bitcoin, what was at some point regarded as the conman’s coin has risen to $60,000 this year alone, Dogecoin came from a meme but made some investors millions, Reddit traders have ridden on the back of Gamestop smiling all the way to the bank. Cyber bulls drove up the prices of several unloved and overlooked shares.

These are narratives that didn’t seem plausible in 2019, fast forward post-Covid, post-Trump, and your gut could be leaning towards any of these, along with several other million people going bullish on these investments.

Your gut feelings have evolved to understanding the potential behind risk or reward, relying on accelerated heart rate, sweaty palms, non-evident fingernails, staring blindly at nothing, these are physical evidence of an undisclosed biological trait…trusting the gut feeling for fight or flight.

Gut feelings — which scientists call interoception — can shape our decisions even when we believe we are relying on data and logic. According to Jason Zweig; the solution is to adopt rules and procedures that enable you to listen to your gut without being ruled by it.

Here are some factors to consider before making your next investment decision:

• Focus on the factors within your locus of control
• Map out a plan
• Assess earnings reports and understand the dynamics of your preferred investment
• Assess dividend yields, price/earnings ratio
• Weigh past successes
• Check the outcome against your original forecast
• Outline all the information you have
• Do a lot of research
• See if all of these factors can teach you anything about how to make your next investment.

In Closing

It’s not advisable to toss a ton of your money acquired over bent back at any stock just because ‘it’s the ‘IT’ stock, that’s what everyone’s buying.’ Past success or public acceptance isn’t always an indicator of anything.