Phototaxis

May 30, 2018 - Published by IAG Wealth Partners

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There was a giant party on the deck at my house over the weekend. When the temperatures start climbing all my neighbors come out for a good time – especially when we have the floodlights on.

I have attached a picture in case you are curious what kind of raucous parties I throw on my deck.

Phototaxis is a fascinating phenomena that scientists are unable to fully explain.

Insects with negative phototaxis are repelled by light. They will go scampering away as soon as the light switch is flipped on. Think cockroaches.

Insects with positive phototaxis are attracted to light. They find it irresistibly alluring to the point of death. Think moths and june beetles.

There are numerous theories as to why insects with positive photoaxis find light irresistible. They range from navigation to reproduction to starvation. But no one really knows.

I have also come to the conclusion that there is an equally powerful and unexplainable phenomena in some investors called “markettaxis.”

Some people seem to be born with an inclination to seek investment return at all costs – let’s call it positive “markettaxis.” They desire the hot stock picks, the winning hand, and something to brag about. They dismiss risk as simply the price of admission. For every successful investment they make there are typically two or three that end in failure, but they have good stories to tell.

On the other end of the spectrum are people with negative “markettaxis” who avoid risk at all costs. They prize safety and predictability above all else. In their minds every investment they make is a winner because it is unlikely to go down in value.

And then there are those that flip between positive markettaxis when the stock market is rising and negative markettaxis when the stock market is falling. Those folks are the ones that tend to make the worst mistakes when investing.

At IAG our investment processes are designed to help our clients overcome their potentially dangerous instincts by developing an investment plan that is customized for their long-term personal and financial goals. It takes into consideration both the risk of the stock market as well as other risks – inflation, longevity, health, career, and many others.

Quote of the week

 

Danial Kahneman: “The tendency to revise the history of one’s beliefs in light of what actually happened produces a robust cognitive illusion.”


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