John R. Nofsinger '88, '96

Summer 2003

The friends you keep & the wealth you reap

People evaluate information through social interaction with others.

There’s an old saying that you can be judged by the friends you keep. But do your friends also affect your wealth?

Ever notice how a group of people who spend time together, whether in a social group or work environment, tend to develop similar tastes, interests, and lifestyles? The reason is that people evaluate information through social interaction with others. This is especially true for topics you may consider to be difficult. Many people consider financial decision-making to be hard. Should I contribute to my retirement plan at work? How much should I contribute? What should … » More …

Winter 2002

Same dance, different tune

Buy low, sell high. Investors understand this basic goal of investing. This idea appeals to the intellectual side of our brain. However, it is the emotional, not the intellectual, side of our brain that usually motivates action. That is why advertisements and sales pitches appeal to our feelings more than our intelligence.

Unfortunately, our emotions and psychological biases make buying low and selling high difficult. Consider the actions of many investors. The great bull market of the late 1990s brought millions of new investors into the stock market. The continual rise of the stock market was a trend that investors projected into the future. Assuming … » More …

Spring 2002

The other side of the coin

Making financial decisions is difficult to begin with—even more so when we let our emotions get in the way.

“Greed is good,” says Gordon Gekko in the movie Wall Street.

Although I would not go quite that far, greed is a natural human emotion. A Wall Street adage states that two factors move the market: fear and greed. This perception is fueled partly by the media and partly by reporters who wish to be dramatic but may not fully understand what truly drives the market. While ideas of fear and greed have dramatic potential, the characterization is far too simplistic. The human mind is too … » More …