# Motivation and emotion/Book/2022/Financial investing, motivation, and emotion

* Multimedia presentation (3 min)

## Overview

* Overview of financial investing
* Definition of motivation
* Definition of emotion
* Overview how motivation influences financial investing and relevant theories
* Overview how emotions influences financial investing and relevant theories
* Improving financial investing with consideration of motivation and emotion
* Focus questions:
* How does motivation impact financial investing?
* How do emotions impact financial investing?
* How can an individual improve their investing by considering theories of motivation and emotion?
* Suggestions for this section:
* What is the problem? Why is it important?
* How can specific motivation and/or emotion theories and research help?
* Provide an example or case study.
* Conclude with Focus questions to guide the chapter.

## What is financial investing?

* Explanation of financial investing
* Financial literacy including explanation of objective and subjective financial literacy (Aren & Hatice Nayman, 2020)

## Motivations influencing financial investing

* Figure 1. Investors are often motivated by seeking financial gain and increasing wealthDefine motivation (Deci & Ryan, 2000)
* Briefly summarise concept of Grand theories of motivation
* Introduce concept of mini-theories of motivation
* Introduce relevant theories of motivation as subheadings

### Extrinsic motivation

* What is extrinsic motivation? (Deci & Ryan, 2000)
* Seeking financial gain as an extrinsic motivation for investing (Croce, 2020)
* Capital gain is the primary motive for property investor, in addition to rental returns (Pawson & Martin, 2021)

### Intrinsic motivation

* What is intrinsic motivation? (Deci & Ryan, 2000)
* Passion for investing as a motivating factor (Croce, 2020)

## Emotions and financial investing

* Define emotion and explain core emotions
* Emotions may be the opposite of rational investing decision making (Aren & Hatice Nayman, 2020)
* Introduce relevant theories of emotion, then expand as subheadings:

### Regret theory

* What is regret theory? (Loomes & Sugden, 1982)
* How does regret impact investing behaviour? (Deuskar, Pan, D., Wu, F., & Zhou, H. (2021)

### Risk taking

* Negative emotions such as fear and sadness affect investing behaviour as they are predictors of risk aversion (Aren & Hatice Nayman, 2020)
* Positive emotions such as hope and pursuit of happiness may make investors more inclined to take risks (Aren & Hatice Nayman, 2020)

### Ending effect

* The ending effect explains that individual preference shifts (and thus they are motivated to act accordingly) toward an emotional satisfaction when they near ‘the end’ (Xing et al., 2019)
* Socioemotional selectivity theory posits that as an individual nears the end of their expected lifespan, their goals shift to emotion-related satisfaction (Cartensen et al., 1999)
* How does the ending effect and SST influence investing behaviour? (Xing et al., 2019)

## Improving financial investing by considering motivation and emotion

* Preventing emotion driven investments by engaging with an investment advisor (Maymin & Fisher, 2011)
* Risk profiling (Van den Bergh-Lindeque et al., 2022)
* Dollar cost averaging to manage investor’s emotions (Statman, 1995)

## Conclusion

* Summarise key points by summarising relevant theories and answering focus questions
* Take-home message 1: Motivation and emotion impact financial investing
* Take-home message 2: There are strategies that investors can use to reduce aforementioned impact