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Can Optimism Increase Your Investment Returns?

investment returnsAre your investment returns determined by your worldview? Are people hardwired to be pessimists?

Millions of years ago, if an optimistic caveman dismissed a rustle in a bush as the wind blowing, our ancestor may have ended up as a tiger’s lunch. As a result of this early conditioning, the part of our brain called the amygdala scans everything we see and hear for negative news.

But according to Dr. Peter Diamandis, the founder of the coveted X Prize for Technology Innovation (and guest on The Goldstein On Gelt Show), this bias is more of a short circuit rather than an intelligent system design. He claims that in life and investing, it pays to be an optimist, as humans pay ten times more attention to negative news than positive news.

Why optimism outperforms

Technology is changing our lives for the better. A cursory list of human accomplishments over the past 100 years shows the future is indeed rosy – per capita income has more than tripled, extreme poverty has declined to less than 10% of the world, and human lifespan has doubled.

This is a time of abundance, also the name of Dr. Diamandis’ book, Abundance: The Future is Better Than You Think. The book’s most powerful message is that technology is “resource liberating,” as it makes once inaccessible resources available and abundant.

The future is optimistic investing

But how does all this optimism affect your investment portfolio? Dr. Diamandis does not mention specific companies but he does mention names, including Bill Gates and Elon Musk – technologists behind inventions that are addressing scarcity and expanding resources, and the most successful companies in the world.  If you believe the world is improving to be a better place, your optimism can find expression in choosing areas of the economy, and the corresponding stocks, in which to invest.

For more on optimistic investment opportunities turning science fiction into “science fact,” listen to our discussion here.

(The opinions expressed on The Goldstein on Gelt Show are those of the guest, and not necessarily my opinion or the opinion of Portfolio Resources Group, Inc.)
Douglas Goldstein, CFP®, investment advisor, is the co-author with Grandmaster Susan Polgar of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing and director of Profile Investment Services, Ltd., which specializes in helping people meet their financial goals through asset allocation and financial planning.

Profile Perspectives is a personal finance blog based on articles Doug Goldstein, CFP®, director of Profile Investment Services, Ltd., published in The Jerusalem Post. The information posted is purely informational and does not constitute investment or tax advice. Advertisements on the site are neither endorsements nor recommendations. Consult your professional advisors before making any investments based on articles or advertisements. Securities offered through Portfolio Resources Group, Inc., member of FINRA, SIPC, MSRB, FSI. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation.

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