One Sunday, 250,000 years ago, John and Tony were minding their own business out on the savannah.
It had been a long week at the club making factory and today was their day off. They were chatting about football and stuff, just like men always do. Nothing much changes.
Just then the grass swished. Tony screamed “lion!” and bolted immediately, running as hard and as fast as he could.
John thought Tony had lost the plot. He knew that the grass swishing was almost certainly the wind. That was the last thought John had before the lion devoured him.
Tony must have covered two miles before he started to slow down. He realised that John was nowhere to be seen but he hoped his friend was ok.
About 50 yards in front of him he saw a lady hominid. Julie was out of breath too. Julie was sure she’d seen a lion in the grass and had fled the scene as fast as she could.
She was worried that her friend Betty wasn’t with her anymore, they’d been having such a nice time chatting about deep, meaningful matters as only women do.
What should they do? They agreed it was probably too dangerous to go back and so they kept walking and talking.
Before they knew it, it was dusk, and they were a long way from home. They needed somewhere to rest for the night and it was getting chilly. It was then that Tony realised just how cute Julie was. They had to lie very close to each other to keep warm and, sure enough, one thing led to another…
Our ancestors that survived were those that fled quickest, fastest and furthest. We are all related to them and their legacy is the amygdala. That’s the part of our brain that stimulates our fear and panic responses.
Most of the time it’s our friend, like when there’s a lion in the grass, but often it isn’t. It certainly isn’t when it comes to investing.
It’s the amygdala that kicks in when investments drop sharply and gives you that uneasy, fearful, sometimes panicky feeling.
It’s the amygdala that then helps you deny all the sane, rational evidence that contradicts what you feel you must do to save yourself.
It helps us dismiss the cast iron fact that ALL stock market falls have been temporary and that the permanent uptrend ALWAYS reasserts itself.
It’s the amygdala that demands you overrule your financial plan and investment strategy.
It’s the amygdala that helps you forget you’re a long-term investor hell bent on maintaining your independence and dignity for decades to come.
None of that seems important in the moment, when fear and panic is everywhere. But it is all that matters.
Don’t get me wrong, I feel the unease too. My amygdala twitches away just like yours but I’m able to appreciate what’s going and what I need to do to counteract it. It’s very simple:
1. I turn off the TV, the internet, and stop reading the money pages.
2. I do not, under any circumstances, check my account values.
Without those inputs my amygdala soon calms down (within a few days) and looks for the next thing to fear. Norwich City’s winning streak coming to an end?
Don’t beat yourself up, we always react extremely to fear, it’s in our genes, it’s how we’ve survived this far, it’s perfectly natural.
But just remember that human nature is, and always has been, a failed investor and we should do all we can to subvert our animal instincts.
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