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Part: 1 Self-Inflicted Common Problems > Mood, Optimism, and Investing

Chapter 4. Mood, Optimism, and Investing

Don't worry, be happy.

Our mood affects the way we analyze our judgment and behavior. People in a good mood make more optimistic judgments than do people in a bad mood. Being in a bad mood makes you more critical. This in turn helps you to engage in more detailed analytical activity. Alternatively, people in good moods tend to use less critical modes of information processing. This mood effect particularly affects relatively abstract judgments when people lack full or accurate information. Of course, this situation describes the investment environment. Bad moods call for more critical analysis in your stock market judgments, while good moods cause you to make decisions without the detailed analysis. Therefore, making investment decisions while in a bad mood may not have a detrimental effect on your portfolio. However, if a good mood causes you to buy a stock without conducting a proper analysis, you will probably regret it in the future.


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