Understanding Behavioral Finance: Why Emotions Affect Your Investing?

Speaker A00:00:00

What if I told you the biggest threat to your money isn't the stock market, it's you? It's an interesting thought, isn't it? About 78% of Americans say they're uncomfortable investing. 78%.I gotta be honest with you, I was a bit shocked at that number. How does that strike you? Listen to this one. Four out of five Americans have anxiety about their financial situation.Now that one didn't surprise me because I don't know about you, maybe you're feeling it right now, that's why you're listening to the show. But four out of five Americans have anxiety about their financial situation. And listen to this one. And this one was really sad when I read this.This is right from Bank Rate 2025. 43% of U.S. adults say money negatively affects their mental health, causing stress or worry. I gotta be honest with you, I felt that at times.Maybe you're thinking the same thing. Well, clearly we have a problem with financial anxiety, don't we? Which leads me to today's listener question.When I got this one, I said, wow, this is emotional. But this is what this listener wrote, says, Ralph, I know I make emotional money decisions sometimes. And then she ends with this.Why do fear and greed affects me so much when it comes to investing? What a great question. And I pulled out those two words because those two words are so impactful. Fear and greed.It's an interesting blend of emotions, isn't it? But the truth is this, fear and greed are powerful forces, we gotta admit that.And oftentimes, maybe too often, they're behind our worst financial decisions. I'm going to get back to what I said a few minutes ago. The market isn't your biggest risk, your emotions are.And today I'm going to show you how to finally beat that emotion.This is Financially Confident Christian, your daily dose of gospel, grounded insight and faith driven tips to help you break the cycle of financial shame with confidence. Hello and welcome to the show. I'm Ralph. I'm so happy you've chosen to give me a little bit of your time.We're still in our final week of this investment series. Yesterday we talked about financial advisors. We talked about how they bring knowledge and keep you on track.But we also said that real financial success comes from choosing someone smart and honest. So if you missed yesterday's show, I'm going to encourage you go check out our show.You can see all of our shows right at our website, simple website to remember, financiallyconfidentchristian.com. but today we're Going to talk about fear in Greek. It's kind of like devices of man, right?We're going to pull how that pulls our strings when we invest. But bigger than all that, I'm going to show you today how to keep them from derailing your financial plan.Because, listen, I've seen clients so many times lose money due to emotional reactions, whether that's selling too soon or sitting on the sidelines and buying too late.And it's affected me too, because I've experienced firsthand how awareness and discipline, when we really have that mindset of awareness and discipline, they can protect us from costly mistakes. So let's go back in time. Let's go back in our time machine a little bit. Let's go back to 2008.Now, if you're from the United States, I don't know how old you are that you're listening, but I'm going to set the scene for you. 2008 headlines were screaming, the market's fallen. There's going to be a huge collapse. The markets were falling daily. And this is a true statement.People's retirement accounts were down 30, 35, 40%. And if you watch the news, if you listen to anything during that time, truth is, fear was everywhere. And it was a contagion. It was contagious.Everybody was feeling this. And I didn't forget it because I was feeling it too. And I had two particular clients that I want to share their stories with you today.Let's call the first one. My panic seller client calls me one day and he says, ralph, I just can't lose another dime. He said, ralph, I can't stomach more losses.I can't do this. And I said to him, I gotta be honest with you, I kind of felt the same way he was feeling.I said, well, think about it, pray about it, because I think that's a very important part of this. But turns out he sold everything. He said, I'm out of the market. But here's the problem with that. He locked in those losses.He was completely on the sidelines. And that decision meant he missed that rebound that did come months later. I've talked about it on the show before.Generally speaking, there's always a rebound. So what's our lesson here? That fear, that's what he was operating under, that fear driven choice causes permanent damage.And my client felt that permanent damage. Well, let me tell you about my other client. We'll call him the late buyer. Now, this late buyer man, he was swell.He said, I'm going to get out of the market before there's even a problem. He beat that rush. But here's the problem. He stayed out during that downturn.But then as he started to see the markets rebound, he rushed in at record highs. He did that what we'll call herd mentality. I'll talk about that in a few minutes. I never forget he said this to me.He said, ralph, everyone else is making money. I don't want to miss out. He had that fear of missing out. Here's the problem with that.Right after he got into the market, the markets corrected again. And guess what? Boom. It hit the bottom again. His losses were immense because he bought at the top of the market. What's the other lesson here?The first one was fear. This one is greed. Those greed driven choices often lead to buying high and losing money. And that's what I want to talk about today.Because think about that. We got two completely opposite reactions. They're so important in investing. One was fear and one was greed. But what's the underlying thing in this?Because this is really the key strategy today. They were both driven by emotions, not strategy. And both of them ended in regret.So let me ask you right now, have you ever made a money move you regretted because of fear or greed? That's a tough question, isn't it? Because I have to ask myself that same question. Listen, I'm turning the spotlight on me.So we need to come to an agreement here. Emotional investing is common, but it's costly. We got to break that emotion. So you might be saying, ralph, how do we do that?Well, the two big takeaways from today, write these things down. It's about awareness and discipline. Because that's the antidote to this. When you have a virus, you.You go to the doctor, they give you an antidote, they give you medicine. Well, if you want to break fear and greed, the antidote is these awareness and discipline. But I'm going to add a third piece of the antidote.A lot of people don't talk about this in the normal financial channels. God's spirit. Because with God's spirit, we can rise above that panic. Because let me just tell you something right now.You're a human being, you're a fleshly person. It's natural. I'm going to tell you this right now because a lot of people don't understand this and how impactful this is.You are naturally born greedy and you're born with fear. That's a normal emotion of a human being.The only way you can break that is to understand God's spirit and rise above that because wise, peaceful decisions always outperform emotional ones. I want to say that again because I want you to really remember this. Wise, peaceful decisions always outperform emotional ones.And a legendary investor named Benjamin Graham said this. And when I read this, I was like, man, this is perfect for today's show.The investor's chief problem and even his worst enemy is likely to be himself. I started the show with that. Today you're looking in the mirror.Okay, so if we know it's ourselves, if we know it's our natural state of man, it's that human feeling of fear and greed, how do we ever cope those emotions? Well, let's talk about those emotions right now because that's where we need to start. Let's start with fear.I guarantee if you're listening or watching right now, you felt fear. You're in a situation you don't know a lot about. That's fearful because as human beings, we want safety.So let's apply that to our investments or fear and what's going to happen. We've worked so hard for our money, so what do we do? We let that fear take over and we sell at the worst possible times. That's what my client did.He called me and said, ralph, I got to get out of this. I can't stomach this anymore. That fear overtook his good sense.That fear overtook everything that was wise, that long term planning, because he was acting out of a fear. He wanted to not be in that terrible, unsafe position. That's the first thing, fear. But the other one is greed and they're equally working.Greed pushes us to chase. Think about this. You're standing on the street, just stand there minding your own business, and all of a sudden a crowd comes running past you.Why are they running? Well, you say, well, I better start running too, because everybody else is running. I'm going to jump on herd mentality. My cows do that.On the farm I raised Black Angus beef. Here the cows hang out together. They herd together. When one gets spooked, they all start running. Well, greed works the same way.We chase after those things. We chase after that market. Look, my client learned.He jumped back into the market when prices were already high and then the market corrected and he lost it again. Because that herd mentality convinces us that, listen, everyone else can't be wrong. Ralph, they must know something I don't know.That fear of missing out, that's one of the new key. The fancy words that young people use, that fomo, that fear of Missing out.But let me tell you something right now, and I believe this to my core, crowds often make poor choices. If you're running with the crowd, you're probably not making the best choices. And that's why behavioral finance is so important.Because this behavioral finance discussion today shows how our emotions, they lie to us. They trick us. They trick us into making bad decisions using bad timing. But what's the antidote? It's that spirit.It's the spirit of God that gives us self discipline to rise above that fear and greed. And again, as I've talked about time and time again in this series, it comes down to consistency and it comes down to embracing a plan.So I got two Bible verses for today. The first one's from second Timothy, chapter one, verse seven. It says this.For the spirit God gave us does not make us timid, but gives us power, love and self discipline. I don't know about you when I read that. It gives me value, it gives me determination. I know that the spirit of God.If I really want to break this feeling of emotion and fear and greed, how do I get that? I tap into the spirit of God. Because what does it say? It doesn't make us timid, it gives us power. It gives us power to conquer these emotions.It gives us love and it gives us. Hey, what's the big takeaway here? Self discipline.Self discipline is embracing the fact that as a human being, you're going to feel emotions, you're going to feel fear, you're going to feel greed. But if we reach out to the Lord, he'll give us that self discipline. Which leads me to Proverbs 14:16.You're probably thinking, Ralph, wait a second, I know that verse. Let me read it. The wise fear the Lord and shun evil. But a fool is hot headed and yet feels secure. I'm going to say something kind of brash.Don't be a fool, be wise, shun evil. Because what does the scripture tell us? A fool, a person that only acts out of emotion. Listen, I've been there in my own life.If I look back into the things that I've made, emotional decisions, what I was as a hothead, I felt secure in those decisions, man. But those were completely the wrong decisions to make. The antidote is that spirit of God. Why about we pray together right now?Lord, we come to you right now and we're battling these natural human emotions, these things that lead us to making bad decisions. That idea of fear and that idea of greed, Lord.So we just ask you right now for self discipline, self discipline in our lives and especially self discipline in our financial decisions. We ask you right now to help us to overcome fear and help us to overcome greed, those natural human emotions.But help us to really embrace that spirit of you, Lord.And we just thank you for giving us peace even amidst the storms, when the markets feel uncertain, when we see the downsides around us, when we hear that noise just coming out in all directions. Lord, help us to ground ourselves, to anchor ourselves in you. And we ask this in confidence in the name of Jesus. Amen.All right, well, here's my action step for today. Pretty simple. I want you to write down one emotional money mistake you've made in the past. Listen, if I did this, I'd have a list of them.I've made a bunch of them today. I just want you to make, just write down one emotional mistake. But that's not the key to this. Then I want you to pray about it.Pray for wisdom, pray for that self discipline so that you don't make that same emotional mistake that the next time just leave it at the foot of the cross and say, God, here's what I did last time. Help me not to do that. Because emotions, fear, greed, that herd mentality are major investing pitfalls.But like I said earlier, the antidote is awareness and discipline. Those are the things that protect us from making those costly mistakes. Because what did the scripture tell us?God gives us power, God gives us love, and he gives us self discipline to overcome things, financial anxiety. And if you want peace, let me tell you right now, friend, peaceful decisions always outperform panic driven ones.So while fear, greed and her mentality can derail our investing and listen to me, if you heard nothing else I said today, they will derail your investing. But God's equipped us with something so much better.He's equipped us with awareness and self discipline to make wiser, more peaceful financial choices. Now tomorrow we're going to change it up a little bit.I'm going to address some people who have said to me, ralph, all you talk about is greed and making more money.No, tomorrow we're going to talk about investing with generosity and we're going to talk about how to tie this into tithing and giving from your growth. I got a great listener question. They asked me a really tough question, but you got to tune in tomorrow to catch it.We're going to talk about how this investment growing can actually be tied into your giving. It's going to be a great show tomorrow as I'm talking about the show one of the things that you can do for me.I give a lot to you as I do these shows every day. Do me a favor and share this show with a friend. Share with somebody who has that feeling of fear or greed or that emotional money decisions.So many people live in that fear and that greed and that feeling. What did the statistics say? So many people are living with that emotion. Just send them to our website.You can send them to financiallyconfidentchristian.com make sure they subscribe and never miss an episode. And here's another thing you can do for me. One of the things that you could really help me with is leave a review about the show.Wherever you listen to the show go, leave a review. You can go right to our website, leave a review, talk about how the show's helping you. Talk about how the show's impacting you.Because listen, people see those reviews and they're impacted by those. It'll lead us to more people understanding what we do here.And one more thing I'm going to encourage you to do because there's power in prayer, pray for one person you can right today, stop what you're doing right now and pray for that person. Encourage them by passing along today's message that they don't have to live in fear anymore.Because the truth is, fear and greed don't have to rule our money choices with God's spirit.And I truly believe this, and I want you to believe this now you can invest with peace and you can invest with discipline and you can finally live at peace. So I encourage you today, go out there and live as a financially confident Christian. Stay financially savvy.God bless you and, and you have a great day today and I'll see you tomorrow.