Why Your Brain Thinks Fast Money Is Real (and Why It's Never Right)

Someone you trust sends you a message. A stock is about to move. A coin is heating up. Get in now, before everyone else finds out. The feeling that follows, the pull to act before the window closes, sits behind almost every investing regret a first-time investor ends up carrying. Speed feels like an edge. It almost never is.

When the Rush Comes From Inside You

People who trade for a living face this test every single day, and the record of how they actually perform is unusually clear. Researchers at the University of São Paulo followed 1,551 Brazilian traders who stuck with day trading for more than 300 days. These were not beginners. They had made day trading their full-time pursuit, with years to get good at it.

Speed did not remove the risk from their trading. It packed the risk into bigger, faster movements instead. If people who do this for a living cannot reliably beat that pattern, a first-time investor acting on a tip from a group chat is playing the same game with worse odds.

When the Rush Comes From Everyone Else

The pull does not only come from wanting to move fast alone. Often it comes from watching everyone else move first. In 2021, digital collectibles called NFTs became one of the fastest-growing crazes in finance. People paid real money, sometimes enormous sums, for the right to own a picture of a cartoon character. Pop star Justin Bieber bought one for around US$1.3 million. It is worth roughly US$12,000 today, a loss of more than 99 percent.

He was far from alone. A later analysis of more than 73,000 NFT collections found that 95 percent of them had fallen to a market value of essentially zero, leaving an estimated 23 million people holding assets worth nothing at all.

None of the people who bought in were foolish. They were watching a crowd move and moving with it, which is a deeply human thing to do, and an expensive one.

Closer to Home

Malaysia had its own version of the same story. In 2020, a sector of the stock market tied to pandemic-era demand for protective gloves became one of the most talked-about trades on Bursa Malaysia. Prices climbed to levels far beyond anything the underlying businesses had ever earned before, driven less by company performance and more by everyday investors convincing each other online that the price would only keep climbing. The rally reversed hard. Some investors who bought near the top are still holding shares worth a fraction of what they paid, still waiting to get back to even.

The Pattern in Numbers

The Twist

Even the most famous cautionary tale in finance about crowds losing their heads turns out to be a story about crowds losing their heads. For nearly two centuries, financial writers have repeated the legend of Dutch tulip mania: fortunes made and lost overnight, a sailor jailed for eating a bulb mistaken for an onion, a canal house traded away for a single flower. Historian Anne Goldgar spent years in the Dutch archives looking for evidence behind these stories. She found almost none of it held up. She could not locate a single person bankrupted by the tulip trade, and found no lasting damage to the wider Dutch economy.

The warning that generations of investors have repeated to describe herd behaviour became famous through repetition, not through verification. It is itself a product of the exact mechanism it claims to warn against.

Two Problems, Not One

It would be tempting to say that investing according to Shariah principles solves this problem automatically. That is not quite right, and it is worth being honest about why.

Wahed's screening process keeps certain kinds of speculative assets out of a portfolio from the outset, including things like NFTs. But the glove stock in Malaysia's own bubble was not disqualified by any Shariah standard. It passed the screen the same way any ordinary company would. The pull toward it did not come from a flaw in the company. It came from impatience, the urge to move fast, combined with something more specific.

Screening removes one kind of temptation from the table before you sit down. It does not remove the pull of the crowd already sitting there. That has to be handled separately, through habits like deciding your investment plan in advance and holding to it, rather than reacting to whatever is trending this week.

What to Do With This

The next time something feels like fast money, whether it is a tip from a friend or a chart everyone online is watching climb, that feeling is worth naming out loud before you act on it. Recognising the costume before you follow it in is the only defence that actually works.