Why Our Instincts Can Hurt Our Investing

Humans are built for survival, not investing. The instincts that once kept our ancestors safe—like following the crowd or avoiding loss at all costs—can actually work against us when building wealth. 

That’s why many investors fall into what’s known as the behaviour gap: buying when prices are already high and selling when they’ve fallen. Instead of capturing long-term gains, they end up locking in losses. 

Common Biases to Watch Out For 

• Loss aversion – losses feel worse than gains feel good, leading us to sell winners too quickly and hold onto losers too long. 

• Overconfidence – believing we can predict the market better than we really can. 

• Recency bias – assuming what happened recently will keep happening. 

• Herd behaviour – feeling safer by following the crowd, even if it leads to poor outcomes. 

  
  

How Advice Helps 

Good financial advice is about more than picking investments. Advisers act as a steady hand, helping clients avoid emotional decisions that can derail their plans. 

A simple written strategy—agreeing in advance on how to respond in different market conditions—can reduce the risk of panic or overconfidence. Reviewing decisions based on process, not just results, also helps clients learn and stay disciplined over time. 

The Bottom Line 

We all have biases. The key is recognising them and putting guardrails in place. By keeping emotions in check and focusing on the long term, investors give themselves the best chance of success.