66% of Investors Regret Impulsive or Emotional Investing Decisions, While 32% Admit Trading While Drunk

Plenty of consumers have made or routinely make impulse buys — that pint of ice cream at the grocery store or a pair of shoes that caught their eye. But when it comes to buying stocks, investors typically want to give their purchases a little more thought.

But that doesn’t always happen, given the most recent MagnifyMoney survey finds 66% of investors have regretted an impulsive or emotionally charged investing decision.

Emotions can certainly play a role in major financial decisions such as buying a house or paying for college, but more calculated, logical decisions not based on fleeting feelings might be a better investment strategy. MagnifyMoney researchers surveyed more than 1,100 investors to see if they let emotions influence their portfolios.

Key findings

• 66% of investors have made an impulsive or emotionally charged investing decision they later regretted. This is more common for Gen Zers (85%) and millennials (73%) than Gen Xers (60%) and baby boomers (54%).
• 32% of investors have traded while drunk. This includes 59% of Gen Z investors who have bought or sold an investment while inebriated — more than any other age group.
• Consumers who manage their portfolios generally have a harder time keeping emotions out of investing than those who rely on a financial advisor. Those who self-manage their investments report higher rates of lost sleep and regrettable decisions than those who use an advisor.
• Most investors (58%) agree their portfolio performs better when emotions are left out of the equation, but that’s easier said than done. Nearly half (47%) report difficulties keeping emotions out of investing decisions.
• 37% of investors have lost sleep worrying about the stock market, and 30% have cried over investing. The top reasons for tears include losing money in the stock market (43%), feeling overwhelmed (36%) and selling too early (34%).

Investor’s remorse

Particularly in today’s world, a single headline about the stock market can put investors and consumers on edge. Additionally, the explosion of retail investing apps has made it easier than ever for everyday traders to make market moves quickly.

This perfect storm has likely assisted the 66% of investors who say they’ve made an impulsive or emotionally charged investing decision they later regretted. (A 2020 MagnifyMoney study looked at impulse purchases, which can tie in to emotional decision-making.)

Those folks may not all be novice investors, but younger investors are more likely to have made these kinds of regrettable decisions:

• Gen Zers (ages 18 to 24): 85%
• Millennials (ages 25 to 40): 73%
• Gen Xers (ages 41 to 55): 60%
• Baby boomers (ages 56 to 75): 54%

And not just impulsive, but sometimes inebriated: 32% of investors admit they’ve traded stocks while drunk. One can imagine how trading apps make this easier than in the old days when an investor might have had to call their broker from the bar. Again, younger investors admit to falling into this trap much more frequently than older traders, with 59% of Gen Zers admitting to drinking and trading, versus just 9% of baby boomers.

Given their apparent habit of making impulsive or impaired investing decisions, it shouldn’t be too surprising that the younger generations are also more likely to lose sleep or cry about their investments. (Younger generations are also more likely to be selective about investments with companies that don’t align with their personal values.)

Fewer decisions, less emotion

Investors who manage their portfolios are more likely to make — and regret — impulsive investing decisions than those who let a financial advisor manage their portfolios. Of those who make their own investments, 71% have made a regrettable decision, compared with 59% of those who take a more hands-off approach.

Those who manage their accounts are also more likely to struggle to keep their emotions at bay than those who use a financial advisor. Though most investors — 58% — agree their portfolios perform better when emotions are left out of it, half of the investors who manage their own accounts report struggling to do this, compared with 45% of investors with financial advisors.

Not only are they regretting decisions more often, but those investors managing their portfolios are also more likely to lose sleep over the stock market. The ups and downs can be dizzying at times, and 40% of those self-managing their portfolios have lost sleep over the stock market as a result.

Perhaps these investors are watching the market a bit too closely, MagnifyMoney senior content director Ismat Mangla says.

“If you live and die with the whims of the market every day, you’re bound to get stressed,” Mangla says.

Financial advisors seem to help, as just 34% of investors who employ an advisor report losing sleep over the market.

Emotional investment

The stock market swings can be devastating to investors, particularly when a bad day on Wall Street can be a prelude to a long-term crisis. In general, 3 in 10 investors report having cried over investing, and many of those tears came after a loss.

A financial advisor might not always help in these situations, as 30% of investors who use an advisor report crying over investments — the same percentage as those who self-manage. Since one of the most popular reasons for crying is losing money in the stock market — with 43% of folks citing this reason — the tear-inducing losses may have been fairly unavoidable.

Still, a financial pro may help less-experienced traders avoid or at least predict these losses.

On a more positive note, 44% of investors say they feel excited about investing, the most popular sentiment. Stress follows closely behind, with 41% of investors tensing up at the starting bell, but folks overall report feeling relieved more than fearful.

Invest smarter, not harder

Calm and positive thoughts can’t make your investments perform better, but a careful and informed investing strategy can help ensure your portfolio stays poised for growth.

Use these tips to keep your emotions in check when you’re making investment decisions:

• Set it and forget it. Investing doesn’t have to be stressful, and it’s an important component of building wealth and savings for the future. Mangla prefers a long-term investment strategy like regular contributions to low-cost, broad-market index funds and ETFs, also known as exchange-traded funds. “Think long term with the understanding that there will be some down years, but that you’ll likely come out well ahead if you plan smartly based on when you’ll need those funds,” she says.
• Know your risk tolerance. Any investment comes with a certain level of risk, but how much risk you’re willing to take is up to you. While a healthy investment portfolio is important, it shouldn’t take priority over your regular living expenses or emergency savings. “Generally, invest money that you won’t need for five years or more,” Mangla says. “If you’re investing money that you need to access soon, you’ll naturally be stressed — and face bigger risk as well.”
• Leave it to a professional. You don’t need to have a certain college degree or be an expert to make money in stocks. It might be worth your time to educate yourself on investing, but hiring a financial planner can take the hassle out of figuring it all out on your own. “The best thing you can do to alleviate money stress is face your financial situation head-on and start planning ahead,” Mangla says. Sometimes the smartest move to take control of your finances is to let an experienced professional guide you.

Methodology

MagnifyMoney commissioned Qualtrics to field an online survey of 1,116 U.S. consumers with an investment account, conducted from June 24-29, 2021. The survey was administered using a nonprobability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.

We defined generations as the following ages in 2021:

• Generation Z: 18 to 24
• Millennial: 25 to 40
• Generation X: 41 to 55
• Baby boomer: 56 to 75

While the survey also included consumers from the silent generation (defined as those 76 and older), the sample size was too small to include findings related to that group in the generational breakdowns.