pretending works!

CAMBRIDGE, MA—A study released Thursday by researchers at Harvard University's Department of Psychology has found that the simple act of pretending one's life is not a complete shambles threatening to collapse at any moment works.

"Even when everything is coming apart at the seams and disaster is almost certainly imminent, putting up a good front for friends and loved ones makes everything better," said Professor Christine Wanamaker, who explained that smiling a lot and evasive answers were usually enough to get by. "Tell everyone that things are fine, and they will be fine. Just don't over-think it."

When asked about her study's methodology, Wanamaker said the research was rock-solid, had been looked over by a bunch of scientists, and definitely wasn't anything to worry about.

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Or maybe you don't have to pretend..

There's a theory in behavioral psychology called the fading affect bias. In simple terms, it states that negative emotions leave our memories much faster than positive ones -- a sort of natural aversion to unpleasant thoughts.


In 1948, psychologist Sam Waldfogel gave a group of participants 85 minutes to write down every event they could remember from the first eight years of their life, and rank them as pleasant, unpleasant, or neutral. Logically, events should have been spread evenly between the three. But they weren't. Pleasant memories outweighed negative ones by almost twofold. People had a distinct positive bias when recalling their past.


So, what's this mean for your investments? People worry and the economy slows down. Then they get over it and it recovers. Same story again and again. John Maynard Keynes called these shifts animal spirits -- "a spontaneous urge to action rather than inaction." The important thing is that they happen consistently and predictably. You get to choose whether you want to stop worrying before the crowd, or wait and follow the crowd. It's the epitome of being fearful when others are greedy, and greedy when others are fearful. And it may be the single largest factor in determining whether you'll be a successful investor or not.