Though there are some who will not make an investment without an intuitive hunch clearing the way, most experts agree that your investments are an area that your emotions should be kept largely out of.

"I think the best investment strategy is to pick some stocks or mutual funds you like, and stick your head in the sand and protect yourself from emotions that are going to cause you to do stupid things," said George Loewenstein, a professor at Carnegie Mellon University, in a FOX News article.

Case in point: how many among us have fallen in love with a house and bought it, only to realize later that it is actually too big, too expensive, too close to the railroad tracks, etc., and is not the excellent investment you once thought it was.

This emotional drive happens with stocks and mutual funds, too. Not only are people more likely to purchase investments they're familiar with (regardless of whether they're the better bet financially), but they also tend to hold onto their once-positive investments longer than they should -- simply because we tend to place more value on something we own.

Meanwhile, with investments people naturally tend to remember negative experiences (i.e. losing money) more than they do positive ones (making money). As a result, after a couple of losing streaks a person may become afraid of investing altogether, and miss out on a good opportunity.

"The two feelings that trip up investors the most are fear and lust," says Hale Dwoskin, CEO and director of training of Sedona Training Associates.

"We often can do great when we are paper-trading but when actual money is on the line we may hold back from making the right decision based on fear, while holding on to an investment too long based on lust."

The end result, when you make emotional investment decisions you may be putting your finances on the line.

People With Brain Damage Make Better Financial Decisions

A study by Loewenstein and colleagues did, in fact, find that people who were unable to feel emotions due to brain lesions were better investors than those with fully functioning brains.

Participants in the study were given $20 for a 20-round gambling game, then asked before each round if they wanted to bet $1 on a coin toss. If they won, they would earn $2.50. If the lost, they would lose their dollar. From a clearly logical perspective, the bet makes good financial sense.

In the end, people with brain damage invested in 84 percent of the rounds for average earnings of $25.70. However, those with "normal" brains invested in only 58 percent of the rounds, for average earnings of $22.80.

Interestingly, the normal-brain participants' ability to experience fear actually held them back from making the best investment decisions.

"What we found out, through additional analysis, is that normal individuals were reacting emotionally to the outcome of the previous round," said Baba Shiv, an associate professor of marketing at the Stanford Graduate School of Business and co-author of the study. "If they lost money, they got scared and had the tendency to fall back and decline to play further."

How to Make Positive Investment Decisions

Of course, most of us do experience emotions, and may -- consciously or otherwise -- allow them to influence our investment decisions. However, you can clear your mind and heart using a tool called The Sedona Method, so that you're able to make the right investment choices for you.

"Investment decisions are best made with a combination of clear reason and intuitive knowing. The way to do that is to let go of the fear and lust that obscures both using The Sedona Method," Dwoskin says.

What makes The Sedona Method unique is that it works in the moment, so you'll be able to clear your emotions anytime you need to think investments. Meanwhile, it's simple to use and the more you do it, the easier and more intuitive it will become.

There's no reason to let fear and lust hold you back from achieving the financial security you deserve. Use The Sedona Method to release the emotions that are sabotaging your decisions, and get ready to make the right decisions to be a successful investor. 

Sources

Psychological Science June 2005, Volume 16 Issue 6 Page 435-439

Stanford Graduate School of Business

FOXNews.com