The whole topic of risk-taking is central to business and investing. But what IS risk? It’s more than just a technical measure of stock market volatility. As individuals, we experience it as a feeling of uncertainty or anxiety in response to possible future events. When it comes to the risks of investing, the feelings get more complicated because they’re tied up with our hopes and dreams for the future. When we invest, it’s ultimately to deliver quality of life at some point in the future. In short, we want to buy some future happiness. But do we actually know what will make us happy in the future? The latest research in the field of positive psychology shows that we almost certainly have no idea. I take a look at this fascinating research and its implications for financial planning in my new article, “Examined Lives”.
Excerpt: “Let’s compare two different people: one wins $1 million in the lottery, the other has an accident and loses the use of his legs. Which one will be happier with their life 12 months after these events? That’s easy. The lottery winner, right? In fact, research on actual Illinois State lottery winners and new paraplegics reveals an astonishing result. Members of both groups are equally happy with their lives a year later. Honestly! This wasn’t just one quirky bit of research, either. Dozens and dozens of well-designed studies have reached the same conclusion: We don’t have a very firm grasp on what truly makes us happy.” READ MORE