I found a great article by Jason Zweig, staff writer for Money Magazine and author of "Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich," that I wanted to share with you(http://money.cnn.com/2002/09/16/pf/investing/agenda_brain2/index.htm).

In this article, he discusses the fact that financial gains and losses are felt most keenly in a portion of our brain called the amygdala, which is in charge of "fight or flight" responses.  As Zweig puts it, "neuroscientists have found that financial gains have a fairly strong effect on the amygdala -- and losses make it flare up like a hot coal."  This is the part of your brain that evolved to deal with the saber toothed tiger lurking around the next bend in the trail, but as one of my colleagues recently put it, "it saves you from the lion but it kills you in the market." 

Thinking about this bear market has also made me think about the advice David Borgenicht, author of "The Worst-Case Scenario Survival Handbook," gives for surviving a real bear attack: "the best thing to do is to play dead and NOT to run."  Of course, this advice is completely at odds with what our amygdala tells us to do.  In the same way, the most successful response to the bear market is also completely at odds with what our amygdala is telling us and this is why so many investors are finally throwing in the towel.

Anyway, let me know what you think of the article.

Dave

David B. Yeske, CFP®

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