We are Hardwired to React Before We Think

Jul 2008 //
Behavioral Finance

…our ancestors learned through trial and error that it was better to run first and think second.  After these sorts of experiences have compounded for a thousand centuries or so, it is no surprise that today we are hardwired to react before we think—to use emotions before reason.  Thus, when the S&P 500 undergoes a significant short-term decline, most investors experience an emotional response rather than a logical one—despite overwhelming evidence that emotional investment reactions are more apt to hurt than help.