Investors typically fear not having enough money to live comfortably when they retire, or becoming a burden to family and friends in their old age. They also have a fear of investing poorly, a fear of missing out on a golden opportunity, and a fear of not being able to interpret complex information. While fear drives many hasty decisions, it is not the only dangerous emotion. Excitement also leads people to make hasty decisions. People get excited about the prospect of getting rich, imagining they are getting in on the “ground floor” of the next big investment boom.
The investment industry exploits these emotions in its advertising, using past fund performance to attract investment in their fund. By implying that they can predict the market’s future, investment firms prey on investors’ emotions.