For Investors, Color is a Powerful Cue

Now consider that the websites and apps of many U.S. brokerages and investment firms show losses in hot red—and gains in bright green.

“We know that people overreact to their returns over short periods of time,” says Daniel Egan, director of behavioral finance and investments at robo-advisor Betterment. “Color can reinforce that reaction and double down on the emotion.”

Betterment, it turns out, recently overhauled its website and apps so that a muted red shows up only when investors are falling short of their long-term goals. Short-term price changes aren’t color-coded.

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This article originally published July 10th, 2017 on Barron's.