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How Emotions and Social Circles Influence Your Investment Choices

Ever felt that peculiar tug in your gut while looking at your investment portfolio? Maybe it’s the sinking feeling when a stock takes a nosedive, or perhaps it’s the ecstatic buzz when everything’s in the green. It’s like you’re on a rollercoaster, right?

But instead of screaming and holding your arms high, you’re clutching your smartphone or staring at a computer screen. Welcome to the world of emotional investing, a landscape where your heart often has as much say as your head.
In this blog, we’ll use a range of anecdotes and analogies to explore the fascinating yet complex relationship between our emotions, social influences, and our investment choices. If you’ve ever wondered why you make certain financial decisions or what’s really driving those quick ‘buy’ or ‘sell’ choices, you’ve landed in the right place.

The Emotional Rollercoaster of Investing

The Fear Factor

You’re the captain of a ship sailing through a storm. The winds are howling, waves are crashing onto the deck, and your ship – let’s call it the “S.S. Portfolio” – is rocking violently. What would you do? Most people might consider turning back or dropping anchor to wait out the storm. That’s pretty much what happens when the market is plummeting. A voice inside you screams, “Sell! Sell!” and the fear factor kicks in. But just like abandoning ship could make you miss reaching a beautiful island beyond the storm, selling in panic could make you miss out on potential future gains.

The Greed Game

Now, let’s flip the coin. Picture a carrot dangling right in front of a rabbit, just a hop away. The rabbit is tempted. It’s so close; he can almost taste it. That’s you, staring at stocks soaring high, thinking about all the profits just a click away. Greed has its grip on you. You might throw caution to the wind and invest more than you should. Just like our rabbit friend could end up in a trap, you could find your financial health compromised.


Remember the story of Bob? Bob, like many of us, was new to the investment game. He heard his colleagues discussing a ‘can’t-miss’ investment opportunity. FOMO – Fear of Missing Out – seeped in. Bob invested a significant chunk of his savings. Unfortunately, that ‘can’t-miss’ opportunity did miss, and Bob found himself on the losing end. If only Bob had paused and reflected instead of letting his emotions rule the roost.
As you can start to see, managing your emotional impulses in the world of finance is akin to mastering the art of sailing through both calm and stormy waters. It’s not about avoiding emotions; it’s about understanding them. Recognising how fear and greed play into your financial decisions is the first step to being a savvy, balanced investor. And trust us, your future self will thank you for it.

FOMO and Your Investments

Let’s step back to your school days for a moment. Remember those popularity contests? The ‘cool’ kids always had the latest gadgets or the trendiest clothes, and you might have felt a pang of jealousy or a burning desire to fit in. In the investment world, FOMO (Fear Of Missing Out) is that cool kid making you want to join the ‘in-crowd’.

When Bitcoin is soaring, or everyone seems to be investing in a certain start-up, the temptation to jump on the bandwagon is real. But remember, not every popular kid has their act together, and not every trending investment is a wise one.

Peer Pressure

This time, you’re at a poker night with friends. Everyone’s raising the stakes, and suddenly the pile of chips in the middle of the table looks like a mountain. Your buddies nudge you, “Come on, go all in!” Peer pressure isn’t just for teenagers, it’s alive and well among adults, especially when it comes to investments. Whether it’s family or friends recommending stocks or certain investment “opportunities,” the influence is palpable. It’s like that poker night; you don’t want to fold your hand too early, but you also don’t want to lose your shirt. Balance is key.

The Social Media Mirage

We’ve all found ourselves scrolling through Instagram, pausing at posts of lavish vacations, luxury cars, or #investmentwins? It’s window shopping for the modern age, but here’s the key: what you see isn’t always what you get. Social media can project a skewed reality, making you think that everyone is winning in the game of investing except you. It’s easy to be swayed by these mirages and make hasty financial decisions based on what ‘seems’ successful. Think of social media as the store window: it may display the best goods, but it doesn’t show you the price tag.
At this point, you’re probably realising that your social circle and even your scrolling habits can be as influential as your emotions when it comes to making financial decisions. And just like with emotional investing, awareness is your greatest asset. Knowing when you’re being influenced enables you to step back and make decisions that align with your financial goals, not someone else’s.

Balancing Act - Mixing Emotion and Logic

Intuition vs. Strategy

Think of your investment strategy like cooking a lovely dish. You wouldn’t toss in a handful of salt when the recipe calls for just a pinch, would you? Sometimes, a smidgen of intuition or a pinch of ‘salt’ is necessary but relying solely on emotional ‘flavours’ can ruin your financial ‘dish.’ Investing is a balance between intuition and strategy. While your gut feeling may guide you, the recipe – your financial plan – keeps you grounded. Mixing the two appropriately can create an investment portfolio that is as delightful as your favourite meal.

The Risk Management Jigsaw

To best explain risk management, take a jigsaw puzzle; each piece represents a different aspect of your financial life – savings, insurance, investments, debts, and so on. Emotions aren’t to be tossed aside; they’re just another piece of your financial jigsaw puzzle. 

Sometimes they fit neatly, helping you complete the bigger picture, like when your gut feeling tells you to be cautious and it pays off. But sometimes, they might be like a rogue puzzle piece that simply doesn’t fit. The art is in knowing when to use that emotional piece and when to set it aside for a more logical fit.
By now, you’ve likely realised that keeping your emotions in check while also acknowledging their importance is a bit like walking a tightrope. It’s a nuanced balancing act that gets easier with time, attention, and yes, a bit of emotional intelligence. Your investment journey isn’t a sprint; it’s a marathon. And in any marathon, pacing yourself is vital for making it to the finish line without burning out.

But what can you do to actively combat your instinctive emotional input?

Tips for Emotional and Social Immunity

Be Your Own Financial Therapist

Just as you brush your teeth every day to prevent cavities, keeping an investment journal can be your daily routine for financial hygiene. In this journal, jot down what led you to make certain investment choices. Was it FOMO? Was it advice from a friend? Or a compelling article you read? Make it a habit, as regular as your morning coffee.

By tracking your motivations, you can start identifying patterns, both good and bad, in your decision-making process.

A Friend's Advice

Ever had to sift through a pile of mail? Junk leaflets, bills, a few gems perhaps like a letter from an old friend? Think of advice from your social circle in the same way. Learn to sort the junk from the genuine pieces of wisdom.

Listen to everyone but filter their advice through your own financial goals and strategies. Not all advice is created equal, and only you can truly know what fits best with your financial aspirations.

So, we’ve learnt that emotions and social influences aren’t foes; they’re merely factors. When acknowledged and managed, they can even become allies. The key to long-term financial success is a lot like steering a ship, you need both hands on the wheel, a keen eye on the compass of your emotions. Oh, and a good crew of reliable social influences helps!

If you’re keen to peer deeper into your own psychological investing behaviour and turn this knowledge into actionable insight, we’re here to help! Whether you have a specific query or want a complete financial health check-up, we’ve got you covered.

Additional Resources


“Thinking, Fast and Slow” by Daniel Kahneman;

“Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard H. Thaler and Cass R. Sunstein;

“The Behavioral Investor” by Daniel Crosby;


“The Dave Ramsey Show” for practical financial advice;

“Freakonomics Radio” for insights into human behavior and economics;

“The Indicator from Planet Money” for quick takes on work, business, and the economy;

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