Investment terms trigger emotional response
Jargon is common in the world of investments and pensions, which can make them seem impenetrable and intimidating. If the thought of ‘Equities’ and ‘Investment ISAs’ makes your heart race, you’re not alone, new research1 has shown that financial terms really do make people anxious.
Researchers used a variation of the Emotional Stroop Test, which measures information processing speed when naming the ink colour of different words, to compare response times for neutral words like ‘pencil’ with investment-specific terms like ‘FTSE.’
Nearly two-thirds of participants had slower response times and higher error rates for financial trigger words, suggesting they may be susceptible to a stress response. Additionally, 44.3% experienced an increased heart rate and 11.5% reported breathlessness.
The terms ‘Stockbroker’, ‘Asset Management’ and ‘Investment Risk’ produced three of the slowest reaction times. Other investment-related words like ‘Bond Fund’ and ‘Equities’ also took longer than average.
Don’t fear ‘FTSE’
Stripping back jargon can help people think more clearly about investments and pensions. In supporting research, Barclays found that 71% of respondents don’t feel confident enough to invest money in the stock market, with a quarter feeling ‘frightened’ by the idea.
Despite these fears, people do want to improve their financial knowledge, with three in five participants keen to learn more about financial terminology. We can relieve the stress of investments and pensions – and take the fear out of financial planning!
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.