Think about it: what do we investors (computer-driven models excepted) have in common? For one thing, we're all human. So when we make investment decisions, psychological factors must play some role.

Over the past few decades, enterprising psychologists and economists have been looking into this. They've come up with some fascinating findings. For example, the pain of losing money is equivalent to at least twice the joy people experience from a similar financial windfall. (As a result, many people are "risk averse." That means they'll forfeit an opportunity to make easy money, just to avoid the remote possibility of losing a few dollars).

This type of research has led to the creation of an entire academic field called "behavioral finance." We last reported on it in 2002, when Princeton University psychologist Daniel Kahneman won the Nobel Prize in Economics. Now, with the help of a grant from the FINRA Investor Education Foundation, we're revisiting the subject, with a series called "Your Mind & Your Money."

What's happened in the meantime is that neuroscientists (brain specialists) have joined the game. They've been putting volunteers into MRI machines and giving them tests to see what happens inside the brain when people are confronted with financial decisions. They've found indications that many of the strange attitudes that we have about money may actually be biological in nature...perhaps left over from the days when prehistoric man had to hunt for his daily food.

Now all of this may be interesting--but you're probably saying to yourself, "what does this mean for me?" Well, more than you may think. It seems that many of the emotional mechanisms in the human brain can get in the way of rational decision-making when it comes to financial matters.

So what can you do to overcome your irrational influences and make sensible investment decisions?

Over the next year, "Your Mind & Your Money" will offer you the chance to find out.
Each month, Special Reporter Dan Grech will examine what behavioral finance and neuroeconomics research has uncovered about particular aspects of financial decision-making. Then later in the month, an NBR anchor will interview a leading expert in the field to elaborate on those findings and suggest how investors can apply them.

P.S. Don't think that the emotion-less and totally logical Mr. Spock (of Star Trek fame) would make a model investor. Psychiatrist turned hedge-fund manager Richard Peterson assures me that is not the case; he says emotions let us arrive at a "good" or "bad" feeling about a stock far more efficiently than mountains of data!