Emotional investing seems like the most intuitive investment because it comes from the heart. If we’re not self-aware, we buy into the bullshit that “what our heart wants” has nothing to do with our negative belief system, our childhood, our unaddressed traumas, our insecurities, our triggers, or our fears.
So what do we do? We agree to invest and follow our hearts.
Unlike financial investments that require disclosure, emotional investing disclosure is not disclosed until the cost has already been incurred.
A few years ago, Bernie Madoff was all over the news. Madoff was the acknowledged operator of a Ponzi scheme that to this day is considered the largest financial fraud in U.S. history. Madoff’s investors, who had no idea what was going on around them, were some of the most famous, accomplished, talented, and intelligent people.
So why did some continue to invest despite diminishing returns?
Why did so many invest even when there were whispers of corruption?
None of us are immune to emotional investing without a return.
I won’t speak for anyone because I don’t want to. I don’t have the right to speak and I’m not educated enough on the issue. Many lives have been ruined and are being ruined every day in Ponzi schemes – financial and relational.
What I can do is offer my opinion on why you should continue investing, despite the circumstances that make returns impossible.
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When the investor’s environment is no longer conducive to the security and solidity that was initially promised and reassured, any continued investments thereafter must be based on emotion.
Why?
Because logic based on reality no longer has a chance; security now needs to be invented. The mechanism itself has now become the irrational core of something very painful and unbelievable to face.
I feel that at this point, many of us will continue investing (despite not seeing the promised returns) because continuing to invest shows that we still believe in investing (and won’t invest our attention in any of the gossip or haters).
You see everything falling apart around you in slow motion. So instead of pulling out, you resort to a right-handed strike in the name of emotional investing.
You think to yourself, “If I show through my actions that no matter what, I won’t give up and I will continue to invest (no matter how bad the return is)… at some point I have to be noticed and appreciated and see the return I deserve… right?”
I’ve been through this time and time again in my life – I never know when to back off and I only back off when life gets in the way.
Here’s my experience with emotional investing – how to know when to bet and how to master the art of pulling out.
The last time I made an emotional investment was a few weeks ago when I was in Las Vegas on business. After lunch, I had some time to kill and I did the one thing I rarely do: gamble.
I walked around the casino like a dog circling a million times before finding the perfect spot to pee. I would approach one of the slot machines and then convince myself that it probably wouldn’t win a jackpot. It wasn’t centrally located, and the jackpot slot machines were certainly only the flashiest and most beautiful, all in the center of the casino.
Myths and “typical” clearly trumped logic.
So I ended up choosing the flashiest slot that seemed to say “Give me what I need and I promise to pay.” All I wanted was to turn my $100 into enough money to buy the high heels I had saved.
And so it went…
Within five minutes, I had spent my $100 and withdrawn another $60. I kept convincing myself that the machine somehow knew how much I had invested and therefore, it had to reward me eventually.
Now and then, it would pay out $15 or $20, which would keep me hopeful enough to hit the “max bet” button again. If the machine didn’t pay me anything after a few spins, I would lower my bet to try to get its attention. It didn’t help that I was hearing voices around me about my jackpot win.
When I got to the last spin, I won $200, but it wasn’t enough. If I got up and left now, I would break even. I needed to win at least something. Forget the shoes, at this point, I just needed to see some sort of return on my investment.
In total, I lost $360. I feel sick even writing that. Not because I lost what I thought was a lot of money, but because I didn’t even enjoy the time I spent playing. It’s like I paid $360 to torture myself.
Where was my emotional investment in all of this?
Harnessing emotional intelligence became paramount when my emotional investment took center stage. I convinced myself that if I walked away at that moment, the next person would, in one spin, grab the jackpot and enjoy all the returns on my commitment—both financial and emotional contributions.
When faced with this level of self-imposed mental turmoil, the only form of relief is to invest more. Giving up is not an option.
I wanted to share the Ponzi scheme/slot machine example because sometimes, it takes an external connection to strike the right chord inside. Instead of being told the right thing to do, you now know. You’ve got your compass back.
I don’t know about you, but the one thing that made me think of these examples was past relationships and friendships that were toxic. Same formula (and bullshit), different ingredients.
How do you know when to make an emotional investment?
You know you can make (and continue to make) an emotional investment when your investment deepens the relationship on both sides. You see a smooth, consistent return that complements your investment.
How do you know when to give up and why is giving up impossible?
We avoid giving up at all costs because of our belief system attached to it. We feel like a failure if we quit and we fear that someone will come along and immediately reap the benefits of the jackpot we deserve if we just turn around a little.
Related : 11 red flags your relationship lacks emotional depth
Bottom line: If you’ve ever been involved in a slot machine/Ponzi scheme, I promise you – it was that way before you lost and it will be that way after you lose. Just because you thought you could make a cat bark (and didn’t), doesn’t mean it will bark with the next person, and certainly doesn’t mean it has barked in the past. Cats meow.
You know you need to pull out when your investment is based on the hope of a wildly exaggerated and exaggerated return.
And if you have low self-esteem like I did, any red flags that indicate you need to pull out will make you even more motivated to invest.
Why? Because your value is tied to hitting the jackpot and getting the subsequent return on your investment. For you, it’s better to invest blindly and “get lucky/hit the jackpot,” than to be met with a clear jackpot of “hello.”
You’re not that desperate. You don’t have to embrace the belief that the only way to get emotionally rich is to date human slot machines and participate in an emotional Ponzi scheme with your fears.
Build your emotional wealth first and get the jackpot that you’ve become. Not by “winning big” or “getting lucky,” by investing in a bad person, but by knowing when to pull out of the bullshit, stick to your white horse, and speak with your actions.
The universe will reward you beyond what any relational slot machine could ever deliver.
