I have always been fascinated by what motivates people. What motivates Tiger Woods to pursue the goal of being the world’s greatest golfer? What’s the motivation driving Warren Buffett to continue purchasing companies instead of retiring in Tahiti? Or how about the motivation behind the trucks allegedly packed with euros parked in front of the Central Bank in Nicosia?

What is most puzzling is the motivation driving investors to buy or sell their equity positions when research shows that holding an investment over the long-term is more successful than timing the market.

As Business Insider puts it, there’s “proof that [investors] stink at investing.” Its headline is catchy, and the chart shows the evidence, as the average investor has significantly underperformed oil, stocks, gold and bonds in the past 20 years. While, on average, investors returned 2 percent, oil, stocks and gold rose about 8 percent.

After inflation, the average Joe or Jill actually lost money.

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You can easily attribute the meager returns to the emotional rollercoaster that drives buying and selling decisions, but to break the pattern of poor performance, it may be better to understand the motivation occurring on a subconscious level.

Anyone who sat in on a psychology course in university is likely familiar with Abraham Maslow’s classic hierarchy of needs driving human motivation. The most fundamental need is shown at the base of the pyramid. Our physiological needs for food, water, shelter and warmth are of the highest priority. Only after those needs are met, we try to meet our need for safety. After that, we can move to belonging, then our own self-esteem and, only until we feel confident that all those needs are met, can we achieve fulfillment or self-actualization.

I have to thank Christine Comaford, the dynamic presenter and global thought leader on corporate culture and performance optimization, for my proverbial light bulb moment when I connected Maslow’s observations from the 1940s to investors’ reactions to global events today.

I love learning about neuroscience and behavioral finance, so I looked forward to her presentation at a global leadership conference for CEOs that I attended in Turkey. But when I walked into the room, I was impressed with how many like-minded executives were interested in her research and insights.

These executives want to understand why customers buy certain products, why investors sell equities to buy bonds, and why their employees don’t seem to have a level of engagement they once had. Also, I believe leaders want to understand why people don’t feel secure or safe these days.

In a recent post in Forbes, Christine stresses how important it is for people to feel safe, to feel as if they belong and to feel as if they matter before they can get to what she calls the “smart state.” This state is when people have access to all parts of the brain and can respond from choice, rather than the “critter brain,” when one simply reacts in one of three ways: fight, flight or freeze.

The needs for people to feel safe, feel like they belong and feel like they matter “are programmed into their subconscious so powerfully that they literally crave them,” she says.

Her discussion particularly resonates with me today, as I believe governments’ actions around the developed world have perpetuated this lack of feeling safe, inhibiting investors from moving up Maslow’s Hierarchy of Needs and preventing their portfolios from achieving the outstanding returns offered by oil, gold and stocks over the past 20 years.

Now, with the most recent drama created by the triangular powers of the Cyprus parliament, the International Monetary Fund and the European Union, news of Cyprus’ bank seizures is sending shock waves rippling across the entire world. How can investors feel safe when governments have the audacity to confiscate their money?

Ayn Rand warned of such actions in her book, “Atlas Shrugged.” Here’s a snippet that is particularly appropriate today:

“Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values.”

And to her, gold was the objective value, “an equivalent of wealth produced,” as paper is only “a mortgage on wealth that does not exist.”

This is precisely why many gold investors were disappointed that the yellow metal didn’t perform well. While gold’s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.

Past performance does not guarantee future results.

The commentary references the investment theory of an investment as insurance against a separate market event that could negatively affect performance of an investment. The reference does not guarantee performance or a safeguard from loss of principal by investing in that asset. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Throughout my years in the financial industry, I’ve been fortunate to meet many wonderful people who helped shape my philosophies about life, business and investing. One such role model has been Seymour Schulich. While some may have never heard of the Canadian entrepreneur, those who meet him, don’t forget him and his straightforward approach to the resources industry. He’s one significant person who continues to be an inspiration to me.

Football Coach Vince Lombardi is another person who inspires me. In my essay printed in Liz Claman’s book, The Best Investment Advice I Ever Received, I share the evergreen importance of Lombardi’s famous line, “Practice does not make perfect. Only perfect practice makes perfect.”

All great money managers are intellectually competitive, similar to the way athletes are fiercely competitive. What they both have in common is that they never experience the perfect day when the conditions for winning are just right. Markets are seemingly random, so to be successful in investing, money managers need to be skilled in the art of “perfect practice.” That way, no matter what obstacle comes their way, the focus on the long-term goal of building wealth remains in play.

Liz Claman, currently an anchor with FOX Business Network, put together an extensive list of top moneymakers who offer their humble words of wisdom. I believe this book can inspire you to be a better investor. Check out the book with investment advice from Warren Buffett, Jim Cramer and Steve Forbes and more here.

What’s the best investment advice you’ve ever been given? Email U.S. Global at editor@usfunds.com to share your story.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Global investors had to muster the courage to keep calm as news of Cyprus’ proposed partial theft of all bank deposits took Wall Street by surprise, closed the country’s banks and drove the price of gold higher.

The thoughtless idea was intended to capture a portion of the $31 billion in bank assets held by Russians. According to the Financial Times, Cyprus has developed a “well-earned reputation for being a haven for dirty money from Russia.”

Although Cyprus’ government came to its senses and blocked the proposed seizure, the damage has been done. To many people around the world, raising income taxes may be one thing, but changing the rules to steal hard-earned savings from all citizens rattles their confidence. What Adrian Ash of BullionVault says is “most amazing” about this situation is that “small savers are no longer sacred.”

It’s remarkable to see the response from Cypriots, as they protested in the streets, with “NO” stamped on their palms, demanding the government take its hands off their money. In the photo, you can see their pushback to sanity.

How did this tiny island make it into the European Union (EU) in the first place? The Financial Times gave an insightful background:

“Many EU leaders had been deeply reluctant to admit Cyprus into the union in 2004, without a peace settlement that reunified the island. But Greece had threatened to veto the entire enlargement of the EU—blocking Poland, the Czech Republic and the rest—unless Cyprus was admitted. Reluctantly, EU leaders succumbed to this act of blackmail.”

Five years later, we are seeing the fallout of Cyprus due to Greece’s financial woes. Many accuse Greece of cooking the books to get into the EU, and then the country proceeded to blackmail the EU at the expense of other European countries.

Crooks get punished, but what about others who unfairly change the rules or break them? Think back to the anger generated by the Ponzi scheme run by Bernie Madoff, who lost $20 billion in cash. In addition, $65 billion in paper wealth vanished. He’s serving 150 years in prison, his son committed suicide, and he’ll forever be known as a thief and a rat.

In Gold We Trust
Since the global financial crisis began, there’s been a rash of poor economic decisions from socialist policymakers scrambling to bring in more revenue to cover their overspending. Rather than streamline regulations to facilitate trade and flow of funds or cut back on welfare programs, they’d rather maintain the status quo and increase taxes.

In Greece, tough cost-cutting austerity measures were shot down after organized unionized workers were rioting in the streets. France’s socialist president, Francois Hollande, has been trying unsuccessfully to increase the top income tax rate to 75 percent in an attempt to “squeeze fat cats and hit the mega-rich, making them bear the brunt of ‘sacrifices’ needed to fix public finances,” according to The Guardian last summer.

In Hungary and Italy, we have seen the unintended consequences of envy policies after implementing a financial transaction tax.

These types of “envy policies” that would be frowned upon by Moses on Mount Sinai aren’t only happening across the Atlantic. Recently, Gene Epstein from Barron’s compared the U.S. debt situation to that of Greece’s. He writes that national debt could “easily reach 153 percent of economic output by 2035” and unemployment could climb as high as 20 percent, but the solution doesn’t lie in “asking the rich to pay a little more.” He says,

“Barron's calculates that immediately increasing the marginal tax rate to 50% on the top 1% of the country's earners would bring in $500 billion over the next 10 years. This would barely dent the country's debt load, which would then be $20 trillion, and do little to forestall a financial crisis.”

I believe poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism.

This only reemphasizes gold as an important asset class.

It may be apt timing for investors to become reacquainted with gold, as our oscillator chart shows that the yellow metal appears to be oversold. On a year-over-year basis, gold has fallen more than 2 standard deviations, an event that has rarely occurred over the past 10 years. As I’ve indicated before, following these extreme lows, gold has historically rallied.

It’s only an event like Cyprus to prompt you to make sure your portfolio has a modest weighting of 5 to 10 percent in gold and gold stocks.

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. By clicking the links above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content. None of U.S. Global Investors Funds held any of the securities mentioned as of 12/31/12.