Why Our Brains Crave Drama—and How It Impacts Investment Decisions
- rmhwebsite
- Jun 5
- 4 min read
Human brains are hardwired to pay more attention to drama, conflict, and negative news. This isn’t just a modern flaw exacerbated by technology and the news cycle—it’s a survival mechanism. Our ancestors needed to be hyper-aware of threats in their environment. Ignoring a positive signal is much less of a threat than ignoring a negative signal. As a result, the brain evolved with a “negativity bias,” meaning we naturally prioritize bad news over good.
Today, that same instinct leads us to click on headlines predicting market crashes, political instability, or economic doom. News outlets understand this and they use it to their advantage. Sensational and fear-based headlines generate more clicks, which translates into more ad revenue. In the age of digital media, attention is currency. The more dramatic the story, the more eyeballs it attracts, and the more money it makes.
The problem? When investors consume a steady stream of negativity, it can cloud judgment and trigger emotional decision-making. Fear-driven investing often leads to common mistakes: panic selling during downturns, holding too much cash out of fear of loss, or chasing “safe” assets after markets have already rallied. Over time, these reactions can erode returns and derail long-term financial plans.
Understanding both our brain’s bias and the media’s incentives is the first step in overcoming them. Smart investors learn to tune out the noise, focus on fundamentals, and stick to a well-thought-out strategy—one that’s based on data, not drama.
The more aware we are of our psychological wiring and the media's motives, the better we can guard against letting today's news sabotage tomorrow's wealth.
A question we have received is, "Is the media allowed to report like this?", "Who holds them accountable for the truth?". Below we outline some of the high level points related regulating the press.
The U.S. Constitution’s First Amendment protects freedom of the press, which means news organizations cannot be censored or punished by the government for publishing truthful (or even controversial or unpopular) content.
This protection allows for broad editorial freedom—including the choice to publish dramatic or negative content.
Defamation & Libel Laws:
Journalists can be sued for defamation if they publish false statements that harm someone's reputation.
Public figures (e.g., politicians, celebrities) must prove that the media acted with “actual malice”—knowingly publishing false information or doing so with reckless disregard for the truth.
Private individuals have more protection and need only prove negligence.
While the press has broad freedom, commercial speech (e.g., ads disguised as news) is more regulated.
The Federal Trade Commission (FTC) requires proper labeling of sponsored content, affiliate links, and paid endorsements.
The Federal Communications Commission (FCC) regulates radio and television but not newspapers, websites, or streaming platforms.
Broadcasters must serve the “public interest” and follow rules around indecency, political advertising, and fairness (though the Fairness Doctrine was repealed in 1987).
There are no U.S. laws requiring news to be “balanced” or cover both sides of a story.
There’s no law against sensationalism, biased reporting, or fear-based headlines, unless they cross into defamation or fraud.
It is far easier said than done to stay composed in a world where technology allows us instant access to news around the world. Here are some tips to stay grounded among the negativity and chaos.
Set clear rules—and stick to them.
Work with your advisor to define your goals, time horizon, and risk tolerance. Create a plan tailored to you—and commit to it. Reacting emotionally to headlines or daily market swings can lead to impulsive decisions that hurt long-term outcomes.
Consider the Source
Does the author or speaker of the information you're receiving have your best interest in mind? If I listen to them, what do they have to gain? Consider where your information is coming from and carefully think about things before acting.
Diversify intelligently.
A well-diversified portfolio—including a mix of domestic and international stocks, bonds, alternatives, and cash—can help reduce risk. Diversification spreads exposure across sectors and asset classes, buffering against volatility in any one area.
Leave politics out of investing.
One of the hardest habits to break is allowing political views to influence investment choices. Emotional, politically-driven decisions often result in poorly timed trades that investors later regret. Markets are driven by fundamentals over the long-term, not ideologies.
Go on a “media diet.”
Limit your intake of fear-driven news. Sensational headlines are designed to trigger emotion, not inform smart decisions. Stay informed, not alarmed.
Focus on your time horizon.
Markets fluctuate, but your long-term goals should stay steady. Keeping your eyes on the bigger picture can help you tune out the noise and avoid panic during short-term dips.
Know yourself—and get trusted guidance.
Every investor has emotional triggers. With the nonstop stream of market data and social media speculation, it’s easy to get off track. A trusted advisor can help you stay grounded and disciplined.
RMH is in the position to bring on new clients so please be sure to share this informational letter with whomever you wish. RMH’s focus is on the customizable investment needs of individuals, families, and foundations. We enjoy working with our clients to better understand their goals, values, and passions for what is important in their lives. In expanding our client base, we look forward to working with people who share these same desires.
We thank you all for taking the time and reading “Market Watch.” It is meant as an educational piece on the always evolving markets. It is something we plan on providing every month, and your feedback is very important to us.
Richard Mundinger, CFA
520-314-2300
Ashlyn Tucker, M. Fin, passed CFA Level III exam