I’m an emotional guy.

• The end of the last Lord of the Rings movie? Blacked that out of my memory.

• The part in Interstellar where Cooper watches the messages from his kids? Scarred for life.

• Those youtube videos of soldiers coming home and their dogs freaking out? I’m bawling.

Investing is emotional too! Not only that, but it can really mess with your head.

To be a successful investor, keeping your own biases in check is maybe the most important thing you can do.

Today, we’re cracking open the human skull/soul (figuratively, relax) to peek at the gears and levers that push us to buy at the top and sell at the bottom. Yes, we’re going full “Jedi mind trick” on ourselves.

The Emotional Pendulum of Market Cycles

Picture the market like a mood-swingy roommate:

• Bull markets: Everyone’s popping bottles, slapping high-fives, and brimming with FOMO. “Stonks only go up!” we chant. We get sucked into the hype, forget about risk, and end up chasing prices that are higher every day.

  

• Bear markets: The high-fives turn into facepalms. Instead of diamond hands, we have damp paper towels. Fear takes over, we panic sell, and dump perfectly good investments. These emotional extremes repeat like a binge-worthy Netflix show—only with less chill.

  

The Core Cognitive Biases

Now, let’s zoom in on a few mental gremlins pulling the strings behind the scenes:

1. Loss Aversion: Losing stings more than winning feels good. This is why we sometimes cling to a losing stock like it’s a family heirloom, refusing to cut our losses because... what if it bounces back tomorrow? 

   

2. Confirmation Bias: Ever notice how we Google “Why [My Favorite Stock] Will Go Up” instead of researching the bear case? That’s confirmation bias. We filter out bad news and hang onto anything that tells us our hot pick is definitely going to the moon.

   

3. Recency Bias: The latest news, the freshest stock tips, and the last volatile swing often carry way too much weight in our decision-making. Like goldfish, we forget decades of market history for that one juicy tweet from last night.

   

4. Anchoring: We fixate on an initial number—like that time your stock was worth $100/share—and treat it like the Holy Grail. Even if the company’s fortunes have changed dramatically since, we can’t let go of that original reference point.

   

Real-World Lesson: Past Bubbles & Busts

Still think you’re too smart for these traps? Let’s rewind to the late ‘90s when everyone lost their minds over internet stocks. Companies with no profits soared on hype alone.

Case in point: Pets.com—yep, the one with the talking sock puppet. This online pet supply retailer hit peak ridiculousness by spending millions on a flashy Super Bowl ad before it even had solid profits (or, honestly, a viable plan to turn a profit). Investors ate it up, convinced that simply adding “.com” to a name would magically print money. But when the bubble popped, Pets.com’s stock tanked faster than a fish out of water, and that sock puppet ended up with more Twitter cred than actual returns.

Anchoring, confirmation bias, all the classics were at play. Eventually, the bubble popped, and investors who believed it would “go up forever” learned—too late—that market mania is just mass psychology on steroids.

Fast-forward to the crypto crazes or meme stocks of recent years. Different era, same story: emotions run wild, and those who don’t manage their heads get their wallets emptied.

Overcoming Emotions & Biases with Process

So how do we dodge these mental bullets? With a plan.

Think of it like a shopping list: if you go to the store hungry and aimless, you’ll end up with expensive, weird junk you don’t need. But if you have a list? You pick your items, pay up, and get out without a cart full of regret.

Set rules for when you’ll buy or sell—based on actual fundamentals or portfolio allocation goals—and stick to them, no matter what your lizard brain says in the heat of the moment.

Something like dollar cost averaging:

Simple Steps to Stay Rational

• Start an Investing Journal: Write down why you’re buying or selling something. Later, you’ll see if your moves were rooted in logic or if you were just following a hot tip from your cousin’s barber. Here’s a Notion Template!
  

• Use a Checklist: Before making a trade, ask: “Am I panic selling?” “Am I buying just because everyone else is?” If the answer is yes, put the phone down and back away slowly.
  

• Zoom Out: If you’re sweating daily stock moves, remember: The market’s been around longer than any of us. One red month doesn’t nullify a century’s worth of upward progress. Besides, missing just a few of the best days in the market (which are usually closest to the best days) leaves you with a significantly lower return.

  

The Bottom Line

Markets swing, emotions flare, and biases lie in wait. That’s the game. But once you know the tricks your own mind plays, you can stop falling into the same traps. Treat this knowledge like a secret weapon—one that keeps you calm when everyone else is losing their cool.

Because at the end of the day, the best edge you can have isn’t a fancy algorithm or inside scoop—it’s a clear, unflinching mindset that knows when to call B.S. on itself.