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Why Smart People Make Stupid Decisions

Oct 11, 2007
How many times have you heard stories about smart people making stupid decisions with their money? This happens all too often and baffles everyone because why do intelligent, sensible people make such mistakes and rash decisions?

This has in fact caused so much confusion that scientists started to investigate the matter and have come up with a new field of science called neuroeconomics. It is a combination between psychology, neuroscience and economics and helps us to understand why sensible people are making bad judgements when it comes to investment opportunities.

According to experts it all stems from the fact that the brain is divided into two parts. One side produces rational thinking and the other reacts based on emotions and intuition. So if someone approaches you saying they have really good investment opportunities that will make you lots of money but you have to act now, people are acting on this instantaneous emotional response and saying yes. What they should have done is investigate the situation and make sure it's right before committing to anything.

The best thing to do to prevent this from happening is to take it slowly even if you really believe that your investment will pay off. The future is unpredictable so it's safer to put little bits of money into investment opportunities at a time in case it does all go wrong. The most important thing is to diversify because if you put all your money into one place and it goes wrong, it will go very wrong and you will lose everything.

Do not trust other people's judgement when it comes to investment opportunities. Sure, go to the experts for advice as that is what they are there for but they do get it wrong sometimes. The best thing to do is research any potential investment opportunities thoroughly and assess their risks and if you think it will be worth it.

Once you have made any investment opportunities a good tip is to stop reading the financial pages or walk away from conversations where people are talking about it. The reason for this is because when you read things that are going to have an effect on your money, your brain engages and you naturally start second guessing yourself.

Investment opportunities are great ways of making money and investing for the future but you do have to be careful. The best advice you can probably get is to speak to people who have done it before as they will be able to give you some great advice.
About the Author
Mansion House Securities, at http://www.mansionhousesecurities.co.uk/, is a London based Investment House providing unique access to high growth business investment opportunities .
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