The Bogleheads' Guide to Investing, 2nd Edition

Chapter Nineteen Mastering Your Investments Means Mastering Your Emotions

You aim for the palace and get drowned in the sewer.

—Mark Twain

“If we can dream it, we can do it.” That’s the traditional American attitude of unbridled optimism and confidence. It’s rooted in a core belief that we live in a land of freedom, abundant wealth, and unlimited opportunity. Americans believe that if we want something badly enough and work hard to achieve it, we will ultimately succeed in getting it. We believe that holds true for individuals, families, teams, businesses, and the nation as a whole. In short, Americans aren’t afraid to go for it. It’s a wonderful attitude, and the motivational engine that drives the largest, most successful economy in world history.

Motivation can’t be seen or measured, but we know it exists. It stirs emotions in us that cause us to behave in a particular manner. Behavior, the product of motivation, is what we can see and measure.

Emotions are extremely important because we all live at the feelings level. Better to be happy and poor than miserable and rich. It’s our wants, our desires, and our feelings that cause us to make thousands of choices every day that ultimately determine who we become. We are the sum of our choices, and most choices are made emotionally. If you doubt that, look at the food we eat, the clothes we wear, the people we associate with, where we choose to live, who we marry, and the careers we choose. Emotions rule.

Relying on our emotions ...