Get Off the Emotional Roller Coaster - Let Data-Driven Methods Be Your Guide

Apr 27, 2022 8:37:24 AM

Emotions are tricky. They cloud our vision, especially when trying to make big decisions. It is hard to see past our immediate fears and anxieties into a more long-term view with the rewards that come with time and patience. Studies have shown that during times of financial stress, people lose 13% of their IQ points - resulting in poorer decision making.

Emotions associated with volatile markets include FOMO (Fear of missing out), FEAR OF LOSS, EUPHORIA, and DESPAIR. These emotions can overpower rational thinking. Add to these emotions the constant feed of the talking heads on TV and the barrage of “information” from digital media and you are looking at herd mentality - great for survival in the wild but not great for your portfolio. Emotions paired with FOMO make us blind to rationality and the rules we all know: buy low, sell high.

Kenny Rogers was not wrong when he told us to “know when to hold 'em, know when to fold `em”.


Behavioral Finance Explains Bubbles (TechCrunch)

So basically, when it comes to making decisions our emotions make us act pretty stupid. No, your gut is not a brilliant fortune teller. Gut instincts are not profitable, and emotional decisions will cost you money. Step away from that emotional roller coaster and realize that you should be looking for an OBJECTIVE FRAMEWORK for making investment arrangements.

Find an investment philosophy that has an objective of risk management, that is adaptive, and adjusts exposure to the current market backdrop because that 60/40 stock portfolio (auto-pilot) is less effective in the modern environment. Look at it as gaining a new set of navigational tools. You are going to need them.

Utilizing data-driven methods to remove emotion and make better investment decisions.

Imagine you are riding in an airplane. You know the flight will have some ups and downs and there will be some turbulence. What if there is an emergency? What if there is a crash? Is there even a parachute onboard? Maybe you don’t even know where the flight will be landing, or when. Does the pilot have a plan? Do you?

It seems unrealistic to go on an airplane trip without a plan or at least a map. But many of us are going about our investment journeys without direction. Here are a few things to keep in mind:

  1. Identify your goals but also identify the emotions that make you want to act - fear, panic, or even impatience.
  2. Make sure your goals are realistic. How much turbulence can you handle? Would a steep decline make it impossible to reach cruising altitude again?
  3. Get logical. Try to look at the potential gain as a focus and find a process of PROTECTION for when the ride gets bumpy. It can even protect you from a crash landing.
  4. Your protection plan is your flight plan. It should be tailored to the amount of turbulence (volatility) suitable for your investment objectives.
  5. This protection plan is the strategy. It is data-driven - using metrics and analytics, not fear. It will keep your airplane at a safe altitude, prepared for turbulence, and ready to adjust to any storms.

When you let go of the emotional responses you might have for the current marketplace, you allow logic and solid fundamentals to drive the decisions that will put you in a position of protection. In fact, a 2018 study in the Journal of Financial Planning found that investors who use a behavior-modified approach to investing that removed emotion saw returns up to 23% higher over 10 years.


Having a process that follows a framework that is built on your goals and keeps an eye on turbulence is the best way to step off of the rollercoaster.

Data is used to find patterns and correlations. It is also used for verifying, understanding, and qualifying decisions. Vineyard Global Advisors manages strategies that are based on data-driven insights, quantitative analysis, and good old-fashioned experience.

For more information on active investments, behavioral finance, and risk management, sign up to receive VGA’s Market Analysis Newsletter, and check out our actively managed strategies.

For more on preparing for a storm, read our last blog post, Is That A Storm On The Horizon?


Investment advisory services offered through Integrated Advisors Network, LLC (“Integrated), a registered investment advisor. Vineyard Global Advisors is a DBA of Integrated.

Investment advisory services are provided through Integrated Advisors Network, LLC (“Integrated”) a registered investment advisor. Registration does not imply a certain level of skill or training. Vineyard Global Advisors, LLC is a practice group of Integrated.

The opinions expressed herein are those of Vineyard Global Advisors and are subject to change without notice. This material is not financial advice or an offer to sell any product. Forward-looking statements cannot be guaranteed. This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Vineyard’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future. Vineyard Global Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Investment advisory services offered through Integrated Advisors Network, LLC (“Integrated), a registered investment advisor. Vineyard Global Advisors is a DBA of Integrated.

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