Happiness may not be your friend.
As we approach the vernal equinox, our nights are turning into days at their fastest and most noticeable rate, and many believe this lifts people's spirits and makes everyone a little cheerier.
But when it comes to investing, happiness may not be your friend.
When deciding where to invest, we need to see the world clearly and not be carried away by overly optimistic forecasts. We want to see opportunities, but we must be honest with ourselves when figuring out if they really exist.
The benefits of sadness
And according to several pieces of research, that's exactly where being happy gets us into trouble. It's not that the future is necessarily bleak, but it appears that our cognitive skills are greatest when we are not feeling our best, as incongruous as that might sound.
Research has shown that being happy or sad changes the way our minds process information. Specifically, people are more sceptical when they are sad, and scepticism is generally desirable when assessing a company's prospects. They also have better recall, sharper perception, and are better able to form convincing arguments.
Sad people also rely less on existing information and preconceptions, and are more likely to chase new information and accord it greater significance.
Evolutionary forces
But why would this be the case? According to one theory, we have six basic human emotions -- happiness, surprise, fear, anger, disgust and sadness -- and these have all survived our evolution because they are valuable to us in some way: Anger makes us fight better, disgust prevents us eating Marmite, and so on. And it appears that the function of sadness might be to help us focus and solve problems.
The theory is controversial, especially when applied to extreme sadness and depression. It sees depression as an unpleasant evolutionary adaptation rather than a disorder, in the same way that a fever is an unpleasant but necessary response to certain illnesses.
Which is not to say that depression as a disorder of the brain does not exist, but that it is much rarer than what would currently be diagnosed as depression. In fact the widespread prevalence of 'depression' seems to suggest that it is part of our normal psychological functioning.
Symptoms of depression, such as withdrawal from social contact, and lack of interest in food and sex, means that the person has fewer distractions and more time to mull over the causes of their depression and to understand it. The fact that a depressed person will score poorly in a range of tests just means they are being asked questions that are not pertinent to their main problem.
Sadness and investing
So if all this is true, and you're feeling down because your partner ran off with your best friend and took your dog and your pick-up truck, it's probably not a good day to review your portfolio.
If, on the other hand, you've been putting off getting to grips with your finances, it might be worth waiting for a miserable wet morning, the sort of morning where it's almost not worth chewing through the leather straps. Then put on Barber's Adagio for Strings and get down to some proper decision making.
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