Why We Can't Outsmart the Color Red

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Think about all the different ways we talk about the color red. It's passion, anger, danger, evil, action! We've put a lot of baggage on something as simple as a shade, and it might actually be messing with how we invest and grow our money.


Researchers at the University of Kansas have just released a study looking into how literally seeing red changes how we manage our financial investments. If you're reading an article about the stock market or watching news about the economy, you've likely seen embedded numbers somewhere in the screen: green for gains and red for losses. It turns out that when we're presented with the same information about stock performance in a uniform "neutral" color like blue or black, we reach different conclusions about how we should view and act on those holdings.

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The more we see a stock listed in red, the researchers found, the more pessimistic we become about a stock's performance, regardless of whether it actually performs poorly. The "we" here means Americans in particular and Westerners overall; interestingly, the researchers also found that this effect is far less present in China, where the color red is culturally linked to prosperity.


All this goes to show that while we think of ourselves as rational, especially when it comes to our hard-earned cash, we're pretty easily influenced by things we can't even predict. That's one reason why it's key to stay realistic about how to invest overall — and that it's always a good idea to take it slow and ask for help when it comes to trying something new.