How emotion’s destroy investment potential​

How emotion’s destroy investment potential​

By: Danny Tran, Jakob Brunsell, Wil Grzelak

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"You're one call away from winning gang"

- DT

Why Investing? ​

We are going to show you common trends so after you (Casey) lose at the casino (blow your entire cadet loan) you’re not completely devastated​ Everyone in this room wants to be successful, investing is one way to achieve that goal

Is investing rational? ​ Or a gamble?​

• Like winning in the casino, human's get greedy by nature.
• Lack of patience in the investment market​

• Economics assumes investors are rational and markets are efficient​

Ways of Knowing ​

Reasoning – Using logic, analysis, and critical thinking to arrive at conclusions.​ ​Ex: I have watched this stock for a few weeks now, tracked its equity, the company news, and now is a good time to buy. ​

Intuition – Knowing something is right due to a gut feeling, which lacks supporting evidence. ​ ​ Ex: I know this call is about to skyrocket ​

Authority – Accepting something as true because an expert says to.​ Ex: I bought 100 shares of AMZN because Jim Cramer on Mad Money said it's about to shoot up.​

Experience – Knowing through past observation, personal experience, or experimentation. ​ ​ I've seen this bullish pattern before on a similar company. I'm about to buy tons. ​

Investing and Reductionism​

• Investors look for smaller patterns within stocks to help determine if they should invest or not​
• Many amateurs, especially day traders, use these to make their decisions​
• Decent in the short run, long holds typically need a more holistic view​
• Patterns, P/L statements, cash flow statements, and management are all other reductionist pieces that can be used​

Loss Aversion​

• On Monday, you go up $1,000. Tuesday you lose $800. Which one triggers more emotion?​

• Prospect theory: Humans are more willing to risk when its for loss

• Disposition effect – Selling assets that quickly increase in value while holding assets that are losing hoping they come back​

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Bias and Heuristics ​

Representativeness Heuristic: ​

• Thinking a stock or company is due to takeoff in value because it looks or behaves very similar to a premade image of a successful company. ​
• Ex: "AI-technology" companies performing well in the stock market, regardless of profitability, due to large company success. ​

Confirmation Bias: ​

• Only seeking information that supports your beliefs and disregarding contradictory facts​

• Holding on to losing stocks, buying without proper research, and poor diversification​

Gamestop and AMC​

• In 2021, a Reddit group banded together and started a massive movement on Gamestop and AMC​
• January 2021 there was a 1,500% increase in two weeks​
• Stock fluctuated between $17.08 and $483​
• AMC jumped ~2,500% from late 2020 to June 2021​

Herding ​

• Large groups of people can drive stock prices up or down​
• Those outside get FOMO and start throwing money at the stock​

• It’s a very expensive and risky game of follow the leader​

How to break the Mold​

• You must detach emotions from your decision-making​
• Just because it worked for someone else doesn’t mean it will work for you​

• Seek out people with the opposite perspectives​
• Collect the relevant data and make an educated decision​

Summary​

• Rational investing requires detachment, diverse perspectives, and data-driven choices.​
• Key takeaway: Successful investors think long-term, stay analytical, and don’t let emotion drive the trade.

• Loss aversion causes investors to hold losers too long and sell winners

too early.​

• Herding behavior and FOMO push markets into bubbles—like Gamestop and AMC.

• Emotions distort rational decision-making, leading investors to chase gains or fear losses.​
• Biases & heuristics (confirmation bias, representativeness, anchoring)

cloud judgment and encourage risky or irrational behavior.

Questions?