The dopamine portfolio is focused on instant satisfaction, while the serotonin portfolio is created with a longer-term outlook
The rapid rollout of new technologies over the past decade has long been incredible to watch. Everything is gaining that much faster, especially when you are looking at how information is processed, evaluated, delivered and shared on account of smartphones and social media platforms.
However, these developments are transforming our lives in ways that go further than just the simple spread of strategy. Many of us now simply surrender to the desire to respond quickly to new inputs, as an alternative to taking the time to properly analyze their very own longer-term costs or benefit.
What concerns us is that this tendency is certainly showing up in the markets, seeing that investors who once required a proactive and thoughtful approach are quickly growing to be reactive traders — a trend that could only get worse as new technology such as Blockchain are rolled out.
Settlement days will soon be cut from days and nights down to seconds and, while combined with the rapid growth of Exchange Traded Funds, it will become that much easier to transfer to and out of trendy as well as once-trendy positions as we react to the data du jour.
Robert Lustig, an endocrinologist and creator of The Hacking of the American Mind: The Science Driving the Corporate Takeover of our Bodies and also Brains, explains this type of pastime by delving into the our psyche, describing how the stress of today’s society (social network etc.) has turbo incurred our pleasure seeking dopamine receptors at the cost of longer-term serotonin-fuelled happiness.
“Dopamine is the “reward” natural chemical that tells our brains we’d like more; yet every compound or behavior that produces dopamine in the extreme leads to dependancy. Serotonin is the “contentment” neurotransmitter which tells our brains we don’capital t need any more; yet a deficiency leads to depression.”
Given recent advances in new technologies, this makes now as important the perfect opportunity as ever for an investment account gut check to see if it have been built on immediate satisfaction seeking or focused on longer-term contentment — a dopamine portfolio or a this portfolio.
The dopamine portfolio is one that is focused on instant gratification together with built on emotions for example the fear of missing out (FOMO). It is deep, stomach, hands-on, highly euphoric and almost enslaving. In extreme cases new deals happen to be actively sought out as one ought to own the hottest sectors, which usually in today’s environment might include marijuana, cryptocurrencies and robotics.
The difficulty that euphoria results in nonrational activity. This isn’t something new as I’ve personally saw this during my days as a sell-side energy analyst in the mid-2000s because spinout junior E&Ps from Believe conversions were actively acquired up by investors during 3 to 4 times net property value. I even noticed a blind pool using a research report target many at 2 times cash!
There can also be more modest dopamine focused portfolios created on old fashioned return chasing after, which means trading into and also out of positions based on modern performance. For example, we experienced investors herding into Canadian collateral funds in early 2017, while how the album works are herding out of them.
On one other hand, a serotonin profile is one built with a longer-term mindset, one that is not greedy together with sets a target gain not influenced by what people are doing. It is often well diverse between active, passive in addition to risk-managed strategies with allocations of looking forward and measuring possibility versus return potential. This isn’t to say that it can’l hold a few exciting dopamine careers, but they certainly don’t take control of the portfolio.
Investments are also placed for a longer period of time and aren’capital t actively traded unless there are major changes to one’vertisements personal circumstances, such as wanting more liquidity or money.
Overall, while the pace of information provides accelerated it doesn’t really mean your decision making process has to keep pace. Instead a patient practical approach is one that may not become euphoric in nature but sustainable inside the longer term.
However, if you find yourself in need of an instant stock market dopamine hit, you might want to recall the old saying that: “Your best buy and sell is often the one you didn’capital t make.”