Over the years, I’ve learned that some of the most costly investment mistakes aren’t caused by economic forces; they’re caused by emotional ones. The subtle emotion that shows up in the hesitation to sell, the urge to chase, or the fear of making the wrong call. Markets are indifferent to all of it, but your portfolio isn’t.
I see this most clearly with clients who become attached to the stocks that have treated them well. On 27 June 2025 I wrote that CBA was massively overpriced. Objectively overpriced. It had nothing to do with the quality of the company, just the valuation sitting way above where it made sense. While clients trimmed their holdings, very few cut as much as they should have. The emotional history was too powerful. When a stock has delivered for more than a decade, people expect it will deliver forever. With CBA falling to $158.38 on Tuesday, it’s obvious in hindsight. Bias feels safe, but it doesn't help the outcome.
Wesfarmers is another good example. Being from WA, I’ve had many conversations over the years with farmers who held outsized positions in WES for generations. Their families built their livelihoods alongside the company long before they had portfolios. When a stock becomes part of your life, taking profit starts to become a question of loyalty. Sometimes people just couldn’t bring themselves to sell it even when the price was stretched beyond logic, or the concentration risk was too high.
This emotional pull isn’t limited to financial markets. My daughter is in the process of buying her first property, and while she has handled the transaction herself, it's been great talking through the negotiation process with her along the way. There’s always a point where you fall in love with a place, but you need to stay detached enough to keep your power in the negotiation. I emphasised to her that the ability to walk away from a deal is everything. If you can’t walk away, you lose your leverage and end up paying whatever it costs. She took that onboard, and it clearly helped her as she progressed.
A different challenge emerges when founders decide to sell their company. The real tension isn’t just the valuation, it’s the shift in control. A founder spends years calling every shot, setting the pace, shaping the culture. Then suddenly a buyer or investor enters the picture, and the power dynamic changes. I’ve seen founders hesitate not because the offer was wrong, but because they weren’t ready for what came after: stepping back, letting someone else steer, or adjusting to being part of a larger machine. It’s not a financial obstacle, it’s a psychological one.
High stakes situations amplify this. In sport, the champions aren’t the ones who feel the most; they’re the ones who manage their emotions best. Final-quarter plays, last second shots and penalty shootouts aren’t won with adrenaline. They are won with calm under pressure. Politics is no different. Leaders who react emotionally get swallowed by the moment. Those who stay outcome-focused shape events rather than being shaped by them.
Investing requires the same discipline. Biases like the endowment effect, familiarity bias, loss aversion, and recency bias work against you precisely because they feel so natural. They offer emotional comfort, but not financial clarity. If they influence too many decisions they can gradually steer your choices away from what’s best for your long-term wealth.
Emotion is part of being human, so you’ll never remove it entirely. But in important moments like selling a stock, buying a property, negotiating a deal, exiting a business, you need to separate feeling from judgment. You can feel the emotion. You just can’t let it make the decision.
General Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.