You’ve probably felt it: the itch to act when you see others making money. The pain when your portfolio drops and you sulk in regret. The stubborn belief that “I should have bought when it was lower.” These aren’t just awkward feelings—they’re behavioural biases hardwired into how we think and manage money.

Understanding them doesn’t just make you a smarter investor, it helps protect your long-term goals from your own impulses.

Bias #1: Anchoring

Imagine you bought a stock at $100. It drops to $80. Your mind whispers: “This was worth $100, I’m just waiting for it to go back.” That’s anchoring—the habit of fixating on a specific number (your purchase price, a peak value, a past benchmark) and letting it drive your decisions.

• Some investors fixate on the peak of the market and avoid investing anew, stuck in past numbers.
• Others anchor to a “cheap” price they once saw, compulsively buy when it drops, only for it to fall further.

When anchoring takes hold, portfolio discipline suffers you hold losers, delay decision-making, or obsess over irrelevant reference points instead of fundamentals.

Bias #2: Loss Aversion

Loss aversion is a powerhouse. Simply put losing hurts more than gaining feels good. Studies show that the pain of a loss can be roughly twice the pleasure of an equivalent gain.
That means:

• You may sell winners too early, just to lock in “something.”
• You may stubbornly hold onto losers—hoping to “get back to even”—even when logic says cut your losses.
• Risk becomes about avoiding loss rather than achieving returns; your portfolio may skew overly conservative, and your long-term goals suffer.

Bias #3: FOMO (“Fear of Missing Out”)

We live in a world of headlines and highlight reels. You see friends or strangers “making big on X stock,” and your inner voice whispers: “If I don’t join now, I’ll miss the next big move.”
That’s FOMO. And it can lead to:

• Chasing last year’s winners, at the worst time.
• Abandoning your strategy because “everyone else is doing it.”
• Ignoring risk because you don’t want to miss out on upside.

Together, anchoring + loss aversion + FOMO make a toxic cocktail. They pull you away from your long-term plan, and right into emotional decision-making.

How Advisors Help Guard Against These Biases

Here’s how the best financial advisors act like a behavioural coach as much as a portfolio manager:

1. Create a written investment policy statement (IPS).
   It defines your goals, risk tolerance, allocations—and anchors decisions to your own roadmap rather than market noise.
2. Introduce a “decision buffer.”
   When you feel the urge to trade out of fear or excitement, a buffer or “timeout” helps. Pause, revisit facts, check alignment with your strategy.
3. Frame outcomes instead of prices.
   Instead of anchoring on “I bought at $100,” we focus on “Is this investment helping me reach my goals in 10-20 years?” Highlights gains AND losses as part of the journey.
4. Encourage process over value-chasing.
   If you chase every hot tip or try to avoid every loss, you end up with erratic performance. A process-driven approach (diversification, rebalancing, long horizon) wins over time.
5. Regular check-ins and emotional calibrations.
   Good advisors ask: “How do you feel about your portfolio right now?” More importantly: “What might you do if things got ugly?” Talking through your reactions ahead of time builds emotional resilience.

Final Thoughts

Your money doesn’t beat you because the market is flawed, it’s often because your mind is playing tricks. The next time you feel the pull of “I must do something now”, ask yourself:

• Am I anchored to a price or benchmark instead of my goal?
• Am I making a move because I’m afraid of losing or missing out?
• Does this decision align with my long-term plan?

If you can answer “yes” to the plan-alignment and “no” to the panic or chase, you’re on stronger ground. Because real financial success isn’t just built on good investments, it’s built on smart behaviour.