Don’t Let Your Emotions Invest Without You

By Danielle Labotka, Behavioural Researcher


Our financial plans may be crafted carefully, but when emotions run high—either because of events in the market or changes in our own situations—something inside us screams to act now.

Suddenly, that financial plan is but a distant memory, and we’re posed to make a thoughtless decision that could cost us money. What happened? Why has our thought process changed?

Some call it the lizard brain. It’s a part of our brain that oversees the choices that were necessary to keep ancient humans (and ancient lizards) alive—like the fight or flight response. Conscious thought is slow, and because the “lizard” part of our brain is concerned with survival, it kicks in to help us take quick action without consciously thinking about it first. It’s that part of your brain that can lead you to scurry away like a gecko trying not to become a bird’s lunch, or to feel like Godzilla stomping through a city.

Given the proliferation of the lizard brain across many species, you can probably guess that it is very good at what it does. But it isn’t good at investing. So let’s talk about a few ways to regain control of your decisions.

We Can’t Let Our Lizard Brain Invest for Us

Investing requires you to work in a different state of mind than the lizard brain specialises in.

To invest well, you have to make a plan, pay attention to the long haul, and stay the course even when things get rocky. Your lizard brain, though, wants to you react quickly to whatever immediate threat you are facing.

In the abstract, you might not think about financial issues like losses to your portfolio as a threat; after all, it isn’t the kind of life-or-death threat the lizard brain was developed to handle. However, , as if they actually are a physical threat.

Because our body gets hyped up, we might find it difficult to stick with conscious thought and not let our emotions make decisions for us, which can lead to investing errors when left unchecked.

How to Regain Control of Your Decisions

Fortunately, we’re not helpless against the tyranny of the lizard brain.  we can effectively regulate our emotions through cognitive change. Cognitive change is when we adjust how we think about the situation (or ourselves) to help alter our emotional response to it.


The next time you see investment news that gets your heart pounding, take a step back and try one (or all) of these approaches to reframing the situation to ensure your emotions aren’t making decisions for you.

  • Reframe the emotion. When you’re experiencing a negative emotion, it can help to see the emotion from a different angle. This can be as simple as reminding yourself that what you’re feeling is normal. If your retirement accounts aren’t on track, you might think, “This is so stressful!” But instead of leaving that feeling there, you can go further to reframe it. Remind yourself: “It’s normal to feel stressed when I don’t think I’m on track for retirement.”
  • Reframe the problem. If a particular issue has your emotions heightened, you can also reframe the problem itself. What if, instead of just being a problem, there’s a silver lining that you can focus on? For example, down markets can be an excellent time to adopt a contrarian attitude and see them not as a scourge to your portfolio, but rather a chance to invest while everything is on sale.
  • Reframe your point of view. Emotions can make it hard for us to see the forest through the trees. We’ve all had the experience of helping friends and family through moments of heightened emotion by providing solutions that were right there—but that they couldn’t see. Try to take a step back and view your situation from the perspective of an objective observer. For example, if you’re feeling swept away by the excitement of a hot new stock, take a moment and ask yourself what you would recommend to a friend in this situation.

When our emotions get going, we tend to want to respond. By taking the time to reframe the situation, you can give your conscious brain a chance to catch up to your emotions before you act.


The author or authors do not own shares in any securities mentioned in this article.Find out about.

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.