By Katie Gomez

The holiday season already challenges investing discipline because it is a heightened emotional time of the year. These months tend to test investors discipline due to shits in spending, family demands, and even psychological perspectives. During times meant for celebration and cheer, it becomes easier to let emotions impact financial decisions in ways that counter prudent strategies.

The more the line between emotion and decision gets blurred, the more we see our portfolios and finances suffer. The addition of social media has only exacerbated this issue around the holidays. In this article, I will review how the holidays, primarily fueled by social media, may negatively impact your portfolios and share how to counteract it. By acknowledging this powerful seasonal pitfall and making intentional moves to avoid it, we keep our financial standing safer going into the new year.

FOMO from watching peers 

With images of peers showcasing spectacular returns or blowing up holiday hype flooding feeds, the fear of missing out reaches a fever pitch. Watching friends, influencers, and trading gurus boast their shockingly high return numbers across platforms; we feel more inclined to abandon our own plans and chase the winning trades they did. As the year ends and everyone seems to be posting about the top of a bull market peak, we become blinded by comparison, and the desire to make more money grows stronger than any rational thought. 

Before you know it, the pulls of envy, impatience, and speculation begin to override wisdom and logical reasoning earned from past lessons in investing. However, giving in to these social magnifications of emotions often leads to disastrous outcomes when market fundamentals reassert themselves. 

Premature exuberance 

This emotional pull can happen to any trader at any time but is significantly heightened during the holiday season. As holiday euphoria content floods across social media channels, our subconscious is more primed to follow suit. This cheerful season tends to reignite a spark in the emotionally impulsive part of our brain that we’ve managed to keep dormant thus far. 

This holiday exuberance feeds prematurely bullish assumptions about potential market returns in the new year. When social media echos and amplifies this positivity through posts anticipating fantastic growth in 2023, abandoning financial plans starts feeling reasonable. After all, if all the sharpest analysts on Twitter predict indexes soaring to new highs fueled by solid GDP and earnings growth next year, why would you opt to stick to boring, balanced indexes or portfolio protections? 

During this time, our brains enter this theta state, where we become more susceptible and less rational, which is not a good combination for investors with assets to manage and portfolios to protect. The holiday euphoria bleeds into January predictions centered exclusively on unlimited prosperity.

Impulsive Reactions 

Given the heightened emotions during this period, impulsive reactions become more and more prominent. Market news and data spread rapidly across feeds, instigating instantaneous decision-making. This real-time flow of finance information encourages hasty reactions vs. reasoned responses. A headline may proclaim, “Stocks Plunge on Surprise Fed Rate Hike,” leading tweeters to furiously declare the “top is in” while a bear market has arrived. As reactive posts and sentiment spread like wildfire across platforms, investors feel pressure to respond immediately, leading them to make hasty decisions. 

To avoid falling prey to making these snap judgments, implement the rule to wait 24 hours before making investment changes in response to the news you just saw. During the holidays, many of us live in the mindset of black Friday shopping; we feel more on edge when it comes to any purchase, thinking we must buy it now before the price changes. However, when it comes to the market, it is prudent to wait a day and trust that we can always decide later; there is no buzzer for you to beat. 

Fighting the pull of herd mentality 

This time of increased susceptibility among traders sets the trap for herd mentality behavior. If everyone agrees strong returns are guaranteed, it’s normal to think there is safety in numbers, and the more people who believe it, the more likely it is to be true. This thought process invokes investors to pile fully into risky growth assets, creating insatiable and volatile ground for your portfolio. 

For example, a stock analyst with a large following on Instagram celebrates Bitcoin, setting new highs and calling for $100K imminently. Their tweet or YouTube prediction spreads rapidly, gaining likes and reshares. Before long, a herd forms behind the call, buying more bitcoin on this perceived expert endorsement and social proof. 

These videos tend to become more prominent around the holiday season as the end of the year nears its head. By the time mid-January hits, the herd often changes direction quite rapidly. As speculators buy based on social signals rather than underlying value, massive corrections happen when sentiment flips. 

Losses hurt even worse. 

Additionally, with social media, the losses we experience sting even more when they are made public. When trades drop into the red, social profiles, display notifications “L” and leave it lingering as a painful reminder. Seeing general loss notices (“L” s) on social feeds multiplies shame, self-doubt, and frustration when positions decline. Some panic sell or revenge trade to escape public facing failure rather than sticking to plans if in private settings. Losses around the holidays often equate to gifts you can no longer give, wasted holiday bonuses, and an overall demoralizing state going into the new year.

To avoid these exacerbated losses, focus on long-term goals over short-term P&L, limit your time spent on social media apps, and tune out the noise to stay focused on your portfolio and plan. In addition, this season requires you to practice even more patience and discipline to prevent impulsive decisions that satisfy immediate gratification or solidify your spot on the bandwagon. 

 In conclusion, once you acknowledge the hypnotic state our feelings can lead us into, you’re already on track to leading more consciously with your investment plans and making values-based decisions. It is essential to recognize how factors like social media and the holiday season make us more susceptible to impulsive choices so we can take the necessary measures to stay disciplined and grounded in our plans to ride us safely out into the new year.