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What Motivates People To Make A Bad Investment?

Mar. 05, 2018 9:22 AM ET4 Comments
John Lohr profile picture
John Lohr


  • Does fear motivate people to make a bad investment? The herd mentality? Greed?  It all is driven by ego.
  • Bernie? Ego brought him investors ad nauseam. Ego brought him down.
  • I bet you can think of other applications of the ego theory outside of investing.

What motivates people to make a bad investment?

  1. Fear of missing out. (See Bitcoin mania).
  2. Media hype: Sensationalism sells stories. Mainstream media is in the business of selling advertising. Period. Especially online.
  3. Entertainers as “experts”. See Jim Cramer. You have a Harvard pedigree, law school, created a hedge fund, and controversy swirls around you. Yet, Mad Money has a stated mission to educate about markets, etc. Right! Through all the shouting shines a massive ego, an entertainer —not worth the print to talk about.
  4. Suze Orman? She’s a former junior account executive/broker who parlayed success as a writer and entertainer. Her knowledge of complex financial issues is slim, at best. This is not a financial planner for your life events.
  5. The Motley Fool(s). Aptly named. Hardly objective, they have “guest writers” and board members and contributors who are nothing but shills for their own investment products. Warning: If you take your primary investment advice from someone who claims to be “motley”, or a “fool”, you deserve what you get.
  6. Bandwagon: Get on it, it’s media driven, which creates the herd mentality.
  7. The “best” money managers—a number of financial publications every year honor the "best" something. The measurement is not performance or client satisfaction or personalized advice, but assets under management or revenues, called production, by the big financial firms.
  8. Titles: “Senior” or “Executive” are titles handed out by firms (or self-anointed) that generally tie to production. There’s no title that stands for ethical experience.
  9. Designations: Courses grant designations. There are literally hundreds of them. Beware of the financial advisor who has so many designations on his/her card, that they have to be continued on the back of the card.
  10. Marketing: Self-promotion. Why do so many advisors write articles? To get their name out. Nothing wrong with that, but it’s not a reason to hire one.

This article was written by

John Lohr profile picture
JOHN LOHR John is widely regarded as a top legal expert on fiduciary responsibility relating to the investment management profession, John is a founding father of the investment management consultant's profession and has personally trained over 100,000 financial professionals. Additionally, he has counseled major Wall Street firms and associations in various aspects of managed account programs, and has trained and consulted to firms on corporate legal, compliance, fiduciary responsibilities and business development issues specific to the investment management industry. A former Banker and teacher and college adjunct, John started his securities representation in 1983, joining EF Hutton in 1987 where he served as the director of Portfolio Management Programs and General Counsel of the Consulting Group. Later, he started his own law firm, specializing in employee benefit, ERISA law and securities law. In 1995, he co-founded The Lockwood Group of companies, where he served as Chief General Counsel and Corporate Secretary, as well as President of Lockwood Financial Services, Inc. Upon retiring from Lockwood in 2002, John devoted his efforts to Howling Wolf Enterprises, a training company and a publisher of books and articles on Investment and Financial issues as well as fiction. In 2011 with partners known in the Investment management business he founded The Learning Network, whose mission is to improve Financial Literacy globally for financial professionals and investors. His current mission is The Ethical Treatment of Somebody Else’s Money, found at somebodyelsesmoney.com. In 2010 the Money Management Institute designated him an "architect of the managed solutions industry" awarding him their Pioneer award for Lifetime Achievement in Wealth Management.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

Buyandhold 2012 profile picture
What motivates people to make bad investments?

The 7 deadly sins.

Fear, greed, pride, envy, lust, sloth and the last one I can't spell...concu..something or other.

Fear causes investors to sell when they should be buying or holding.

Greed causes investors to buy when they should be holding.

Pride causes investors to vastly overestimate their stock picking skills. Of course, ten or more years in the stock market will quickly cure almost all investors of pride.

Envy causes investors to buy an overpriced stock that has already made a ton of money for other investors who got in early.

Lust. That is the same as greed,

Sloth. Causes investors to fail to do enough research to recognize a good buy when they see one.

And that concu.....something or other. I think that's the same as lust and greed.
John Lohr profile picture
I thought it was gluttony.
Tidal Alchemy profile picture
Don't forget wrath. Once I got so angry because I stubbed my toe against a table that I bought a hundred shares of something at market.
John Lohr profile picture
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