Dopamine vs. Discipline: How Your Brain Impacts Your Wealth

Your brain can make or break your wealth. In this episode of The Capitalist Investor, Derek and Tony explore the battle between dopamine and discipline — why we chase quick wins, how emotional investing can sabotage your portfolio, and what it takes to build lasting wealth with patience and a plan. From meme stocks and NFTs to panic selling and loss aversion, they unpack the psychological traps that derail smart investors and how to train your brain to stay the course. Learn how to set goals, reward yourself the right way, and rewire your mindset for long-term success.

Keywords: investing, wealth, dopamine, discipline, financial planning, retirement, mindset, meme stocks, emotional investing, money habits

Transcript

0:00

Your brain and money. Dopamine versus discipline. On this episode of The Capitalist Investor, we're going to talk about how your brain can either be your worst enemy or your greatest asset. So that when we start building wealth, we are doing it in the right way. And we're not looking for instant gratification and fear traps. We are going to talk about building wealth on a disciplined scale. All right. Hey, Tony. How are we doing today? Good, man. How about yourself? Oh, you know, can't complain too much. I like that. Okay. All right. Hey, man, there's nothing wrong. There's launching off first thing in the morning doing our podcast, then just 110% positive attitude I love it. Yep. Love it. All right man. So yeah. Dude, we got, we got some. You know, I thought this was a pretty good topic for, kind of what we're seeing in the market now. You know, we've kind of just been grinding up around all time highs, especially the last couple of weeks. So. And, honestly, I drew, an immediate comparison with, like, sports teams, just because we saw the, the NFL trade deadline. But we are as humans, we are just wired for, like, instant gratification. Yeah, we're we're wired for, like, high risk, high reward type of situations. Like, that's that's just what that's just what our brains like. And that's why people like blackjack. Yeah, exactly. You know. It's like, man, I, I'm going to figure out in five seconds I'm going to be winning and losing. Yep. I was it was hilarious. Like, I was scrolling this morning and I saw, someone play a hand of blackjack for $5,000. Right. This is what they do for their content. And the caption was like, this is like the original dopamine rush. Yeah, because because it really is just, you know, wagering something and then having an instant win or loss. Yeah. It's like, oh, man, I get the split. And then I get to split them again and double down on all of them. Yeah. Let's go. I got 40 grand in front of me. Yeah. Only bananas. Yeah, but that's what this is, man. It's like, so first and foremost, like, over the ever since Covid, actually, this is what I really feel like this again, I talk about this monumental time was when things really launched off and the lure of an instant win became exceptionally high during that time. And I'm going to start with NFTs, the, you know, selling picture digital pictures for money. Right? That's one of them. I remember when I was younger, baseball cards were huge and basically fallen off the map. Unless you just make one card and put somebody's jersey in and sell for a million bucks. Right, guys? Some crazy cards today, right? But GameStop meme stock, you know, those mean meme stocks were the the company that made it was just all momentum and you know, hype and all like that is the biggest problem. And it maybe even stems from social media. You know, again, no one no one posted their losses on social media. They post their wins, never their losses. And, that's that's the lure of an instant win because that is how you're right. That's how you mentioned before. That's how we're wired, right? We are wired to win. And if we can do it fast and easy, it's even better, right? So unfortunately, from just time, I mean, just just look at Warren Buffett, that dude, I don't think I mean, playing just stocks. And in the stock market in general is is a gamble, right. It could go to zero tomorrow. You never know. But that guy didn't gamble like he didn't get into you know, I don't even I think recently he said he hasn't even been part of like, this whole technology I meme stock. Like he is doing the old dividend paying stocks strategies and you know I, I do believe in mean reversion. You know all this stuff that is highly inflated, you know, could be coming back down to earth or everything else catches up to it. So I don't know man. It is right. It's an instant win. Right. So what are your how do you feel about that. Yeah. You know it's it's it's you know it's basically two when, when you're out there you're looking at investments, you're trying to pick out stocks. Whatever the case may be. You know, it is also you know, it's to opposing forces, right? Because on one hand, we're definitely wired for that, that instant gratification, the dopamine hit. But we're also, you know, especially I think our generation. And before we're also brought up, you know, to have a fear of loss. Right. So, you know, we're it's the same kind of thought process applies to to trying to get that quick win, but also preventing that downturn. Right. And, you know, I think this is, you know, what has stuck with me. And and you know Tony as well, I'll just speak for him because we, we talk quite a bit. You know how many how many retirement. Well, not a lot, but we have seen retirement plans get ruined by panic selling. Right? Locking in losses. You know, I, I can come up with a couple specific cases during Covid on the downturn. That will stick with me forever. You know, you know, just people that couldn't take it anymore, right? They could not turn on their TV and couldn't. Could not. They just couldn't take another single cent loss and they just locked in their, their losses and just missed the upside on the way back. Yeah. I mean that's during Covid. That was during the the Trump tariff board thing. I mean like there was just like oh my god. Like this, this, this is it's happening. Right? Everyone's just sitting around waiting for it to happen and it hasn't. And that's been detrimental to most people because as you're selling when you're completely panicked. So you're down. Yep. Exactly. You know, I will take I will flip that on the other side though. You know, you have we're talking about, you know, the loss aversion. But there's that win side of things to where, hey, I bought this stock for $100. It's $500 today. I ain't selling it right. You should really consider doing. Or at least take 400 off the table and work with, you know, take house money off or take take the the casino money off the table and work with what you put in there because there's a thing that you see quite a bit, especially with, people that are emotionally attached to their investment ideas, the emotions, emotional investing, they get round tripped, but at $100 to 500 comes back to 150. Okay. You're still up 50%, but it could have been a 500%. So there's that other side of that too. So panic selling and resistance to sell is what I'll call it. It's another thing. And then just to kind of both on to this before the show started, we were talking about how, you know, people can, you know, loss aversion like some people just they're, they're addicted to debt, right? They they're okay with it. They're moving on. They're okay paying the interest or whatnot and are addicted to it. And on the other side of that coin is that there's people that are addicted to spending money, you know, they're they're wired to save and they can't they can't they can't spend their money and and when I, you know, we talk about building successful financial plans like, man, your plan so successful that you could, you know, spend an extra 25 grand in retirement. Right. And they look at me like I don't I wouldn't know what to do. And then there's somebody that's sitting in the back there like, hold my beer, I'll show you how to spend that. Exactly. So we again, it's all how you're wired and how disciplined you are and then how long you run that discipline program. Right? Right. Because it'll become a habit at one point. So there's definitely that. When it comes to, you know, your, your own CEO, right? If you hire a CFO, like, like us, right. That's what we always call each other. You know, we're a personal CFO. I don't tell you what to do with your money. I just tell you the consequences, good or bad, of decisions that you can make. So, again, I just talked about it before. If you can just have the delayed, it's the instant gratification. If you put that in the back burner and know that that's most people don't know how to control that. If you get a sudden spike like they don't know when to sell, right? Or or they sell too early, they still too late. I mean, no one's perfect, but most people hold on and write it back down, right? So if you can just pick a good program, like a good investment strategy and always save and you save and move on and you find money in the budget to consistently save, you're going to absolutely always be in the in a better situation. Yep. For sure. And the only con is you know, again, with this mentality, it's like, hey, I, I've done this so long, I'm used to saving. I don't want this, I want I don't want to run out of money. I don't want, you know, they're they're the habit is maybe unbreakable. I've seen that. So what are your thoughts there? Yeah. You know, I think, you, having a personal CFO, whether that's yourself or someone else, to kind of, obviously you can bounce ideas off yourself, but, you know, having that personal CFO to, to have, a dialog with, I think is very important because what it really comes down to, like, like everything else is, is really is just training your brain or, you know, rewiring your brain to, to to tell you that things are okay. Right? Like if you are 68 and you've delayed retirement for an extra two years just to be safe, even though your plan says you could have retired at 64 and then you know, you're spending, you know, 25% less than the financial plan tells you. Like that is a very common thing to have happen. But if you start earlier on your kind of your financial journey and you kind of prepare yourself mentally to to trust what, what the planning tells you to do, you're going to have a much happier retirement. And it's so it's not an especially with us, as advisors, it's not just all about dollars and cents. It really is kind of having a partner to help train your brain to let you know that things are okay. Right. And to also remind you. Yeah, because that's one thing for me to just say it and we move on. But like constant coaching of, hey, these are the right paths, right? And this is why we're doing it. Reeducation. Yeah. That's that's the one thing I'm, I'm very big on. And in our firm is because of the planning team. But when it comes down to just doing all of this, you know, how do you rewire yourself for for wealth and freedom? And it comes down to the the baseline for anyone, especially if you start saving. Right. If you're brand new to, you know, saving and maybe you just got your first job, but like automation and discipline, pick a number you're going to save and set some goals. Maybe you're going to say, hey, I'm going to increase my savings every time I get a raise. Yep. Or my goal is to like, hey, I want to get to that max out moment. What can I the max out moment for maxing out my my retirement plan? Like, what do I need to sacrifice to accomplish that. So goal setting is good but it needs to be the other way around too. We have to again, once you hit your goals we need to understand that. Like sometimes you need to like celebrate your goals. And in I think a lot of people don't do that. So what does that mean. You know maybe you do you splurge a little bit on, you know, a vacation clothes, jewelry, whatever it may be. But again, we we have to hit our goals, and they need to be meaningful and, you know, but, you know, there's nothing wrong with the goal set. And the goal might I talked about material things. Maybe that goal is like, hey, if I do all of this stuff, I can retire two years earlier. Yep. That's you know, that's a big deal, right? So, and if and I'll even say this. All right, you know, like, again, we talked about the dopamine rush, the lure of winning. There's nothing wrong with trying some of this, but, you know, I have some clients that do this where, like, I want to pick some of my own stuff because you guys are, you know, not picking, like, the new hottest micro-cap stocks, right? Yes. They are not doing that. Correct. But we can sit down and talk about it and set an account aside, a play box account, a play account, just something where you're putting we got to figure out what that number is. Whether it's 5% of your liquid net worth, your your 10%, 20%, I don't. We got to figure out that number right. Because we have to then assume inside the planning software that it gets cut in half or goes to zero. If you lose all that money, are you going to make it right? Right. Are you are you okay? Right. Because that would be a what if. What if I simulate hey, you got your play account in it and it got wiped out. Yeah. So that's a that's a big. Thing because it's still it's fun. Right. And if the plan tells you that you can, you can set aside a little bit and have some fun and get a few wins. Yeah. Absolutely. You know, we can we can definitely work that in. We're not saying not to have fun. We're not saying even not to take risks. You know, just do it as part of an overall plan, an overall strategy. And and I think you really nailed it with the setting of the goals. You know, when you're, when you're 55, maybe you don't have any of your assets outside of your 401 K. Like that is not too early to start planning, right? Never too early. It's never too late to start saving, ever. Right. And we talked about that in one an hour. Just one of our last episodes, you know. Hey, you're in your mid 50s. What are the ten things you need to do till, you know, to hit the finish line? Right? Right. Even let me get there earlier. You know, we laid out about ten different ideas, in strategies. So you'd be missed that part, if you missed that podcast and, you know, hit the rewind button and. Check it out. Check it out. So. All right. All right. Well, excellent episode this week. If you guys have, questions or comments, ideas for a show, hit us up at info@connect.com, and we'll talk to you next week. The opinions expressed in the podcast. Are for general informational purposes only, and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.