Relationship Between Emotions, Truth, And The Decisions We Take

In our profession of guiding people to make the right investments, we deal with a range of client emotions. Similarly, in an advisor’s professional life, an individual goes through various ups and down, all of which is an emotion intensive journey. In effect, an advisor has to consciously handle one’s own emotion while helping a client navigate through his or hers during different phases of their investment journey. Very often, individuals tend to overlook this aspect, but I believe there is a strong relationship between emotions, decisions, and truth. 

A human can experience around 34,000 different types of emotions in his or her lifetime. An average human makes 35,000 decisions per day (Source: www.psychologytoday.com). 99% of these decisions is not based on facts or truth but is based on emotions/feelings. Joy, fear, love, acceptance, anger, greed, are all different forms of emotions we experience in our life. 

Among this gamut of emotions, fear is the oldest and strongest of all human emotions. If one were to look closer, it is the fear of the unknown that unsettles people. From an investment standpoint, this was clearly visible during the March – April 2020 phase when most countries across the world, including India announced blanket lockdown for the first time. Since this was an unprecedented move, Indian equities corrected more than 40% within a span of just three weeks. Such a steep correction within a short span was a first in the Indian equity history. However, over the next six months, markets recovered swiftly and gained 50% percent. For those who remain invested, this was one of the worst roller coaster ride they could have been in their investing lifetime. 

It is a known fact that the lesser decision an individual makes, better are the odds of that individual being happy and successful. This is because truth is a fact and has no emotion or feelings attached to it. A close look at what we do daily will show that we do not need all the things we consume or buy on a daily basis. But our feeling associated with these acts will obstruct us from acting on this truth. 

As an individual it is important to understand that while emotions are powerful and has the potential to move us into action, they are not facts or truth. The earlier one realizes the difference the better it is. In stock market, the price fluctuation is a sign of what different investors perceive/feel about that particular stock. But eventually markets will find the truth (through earnings, corporate developments) and the share price will settle basis the truth. A true advisor or analyst acknowledges this and guides clients away from emotion based decision-making. 

Also, when we make a mistake, the fear of getting exposed makes us angry. As a defense mechanism, we tend to attack the person who is telling the truth, leading to a break down in relationships. So, for both personal and career growth, it is vital to know how to handle emotions. 

One of the biggest human weaknesses is to use emotions to prove what is right or wrong. A single development can be interpreted by two different individuals in multiple ways. While one may interpret that fact as truth but the other may interpret that fact as false/wrong. This leads to a lot confusion.  When we say an individual is mature, what is being implied is that that person has a good control over his feelings. This enables him or her to think clearly and make wise decisions in life. 

When it comes to businesses, most use fear and greed to sell their products knowing fully well that their potential customers are vulnerable to emotions. Very few businesses share information as a tool to sell their service or product. 

In a nutshell, emotions in majority of the cases do not lead to rational decisions. Truth is bitter but there is no harm in truth. So next time when making an investment decision, remember to stay away from people who sweet talk you into making an investment decision. When it comes to money matters, a hard talk is always better and tends to deliver solid returns over the long run.