May 2019

The feeling has hit us all at one time or another—when we turn into onto the street of the house we grew up in, catch a waft of the a favorite meal coming out of the oven, or hear a certain song in the aisles of the grocery store. Nostalgia. 

Nostalgic memories can trigger feelings so strong, it’s like we’re right back in the moment. With music, neuroscience even has a term for it—“music-evoked autobiographical memories (MEAMS)” and the research around this phenomenon has even helped those suffering from Alzheimer’s disease and brain injuries recall memories of their past! But does a penchant for nostalgia play a role in the behaviors that influence how we make decisions about our financial lives? As it turns out, it does, and most of the time for the better.

In collaboration with TED-Ed Aminations, professor and psychological scientist at North Dakota State University Clay Routledge shares the history of nostalgia in just four entertining minutes. Early research likened nostalgia to a disease akin to depression, but as science evolved, so did the realization that unlike depression, inducing nostalgia in individuals can increase feelings of belonging and improve self-esteem, encourage psychological growth and even increase our inclination to be charitable toward others!  

In 2017, Bradly Klontz, Psy.D., CFP® and Associate Professor of Practice in Financial Psychology at Creighton University Heider College of Business conducted a study (in conjunction with Capital One) that found that positive memories could be harnessed to improve financial decision making. The experiment found that using positive memories triggered by a nostalgic item (photograph, memento, ticket stub, etc.) participants were able to develop a deeper emotional incentive for saving money, by relating it to family, values and goals that mean the most to them. 

It’s not all good news, however. In a recent article, Larry Swedroe unpacks a common investing mistake—for investors and advisors alike. In investing, ‘home country bias’ refers to the act of creating a portfolio that’s heavily represented with equities from country of residence. For U.S. investors and advisors, doing so means missing out on a large portion of the global equity market and missing the opportunity to capture the benefits of a truly diversified portfolio. 

Vanguard also recently published an article about Global investing.

As one glance of the reality TV lineup will tell you, there an (entertaining) marketplace of entrepreneurs looking to capitalize on our nostalgia. Vintage furnishing, toys, retro promotional items, trading cards are all sought after by buyers and sellers alike. Although not all collectibles are investments, there are a few things that do go for big bucks—if you have that Tom Brady rookie card to sell to the highest bidder.