Emotional Investing is Expensive. Here’s a Better Way
Most people don’t lose money in the share market because they picked the “wrong” stock. They lose money because they acted like a human.
They panic when headlines turn ugly. They freeze when markets fall. They chase the hot thing too late because they don’t want to miss out. And they sell too early when things start to wobble, even if the long term trend is still intact.
This is emotional investing. And it’s more common than anyone likes to admit.
The uncomfortable truth is that investing is one of the only areas of life where doing “more” often produces worse results. In most parts of life, more effort equals better outcomes. You practise more, you improve. You work harder, you progress.
But investing works differently.
The “more” often shows up as noise. More reacting to market moves. More tinkering with your portfolio. More opinion driven decisions. More news consumption that feels informed but actually increases anxiety.
And the more anxious you feel, the more likely you are to act at exactly the wrong time.
If you’ve ever felt stressed watching markets move, you’re not alone. But the real issue isn’t the market. It’s how our brains respond to uncertainty.
The real enemy is not market volatility. It’s decision volatility.
Markets move. That’s their job.
The problem is that many investors don’t have a repeatable decision making framework. They have a feeling. Or an opinion. Or a prediction. Or a mate who read something.
When investors don’t have a defined process, every market move becomes a question:
Should I sell now?
Should I wait?
Should I buy the dip?
Should I move to cash?
Should I switch to something safer?
And in that moment, investing stops being a plan and becomes a negotiation with fear.
This is how portfolios get damaged. Not by one bad decision, but by a series of small reactive moves made under pressure.
Why emotion shows up so strongly in investing
A few forces make investing uniquely emotional:
Money represents safety, so any threat feels personal.
Losses feel worse than gains feel good. (It’s called loss aversion, and it’s wired into the human brain.)
The media rewards drama, not discipline.
Markets move fast, but most strategies are long term, which creates tension.
Social proof is powerful. When everyone else is rushing in or pulling out, it’s hard not to follow.
It’s not that investors are irrational. It’s that we’re human. And that’s why a rules based approach can be so powerful.
Rules beat feelings because rules remove the debate
Once you accept that most investing mistakes aren’t technical, they’re behavioural, the next question becomes:
“What does a process look like that keeps emotion out of the driver’s seat?”
This is exactly where Relative Momentum comes in.
At a high level, Relative Momentum is a disciplined, rules based investment methodology designed to do one key thing: reduce emotional decision making by replacing opinion with process.
Rather than relying on predictions, gut feel, or headlines, Relative Momentum follows a structured framework that focuses on what markets are actually doing, not what we think they should do.
In practice, that means decisions are guided by:
predetermined buy and sell signals
rotation based on trend strength
a process built to remove emotional bias
the ability to move into cash when market conditions don’t support share investing
And that last point matters.
Because it’s easy to say “stay the course” when markets are calm. It’s much harder when volatility hits. A framework that includes clear exit signals is one of the most effective ways to protect investors from the most costly behaviour of all: panic selling at the worst possible time.
Strength often outperforms “cheap” and the data supports it
Many investors assume the best strategy is buying undervalued stocks and waiting patiently.
That can work. But it has a blind spot.
Some of the strongest returns come from assets that are already moving higher, often driven by structural themes, sector rotation, or improving market sentiment.
When this idea is tested over long periods, the results are often counterintuitive.
Looking at more than 30 years of market data, a simple test compared buying every stock making a new 52 week high with buying every stock hitting a 52 week low, then holding each for 12 months.
The outcome challenged a common assumption.
Stocks bought at 52 week highs were more likely to be profitable, delivered larger average gains, and experienced smaller losses than stocks bought at 52 week lows.
In other words, buying strength outperformed buying weakness across all key measures.
This doesn’t mean buying at highs always works, or that buying “cheap” never does. But it does show that “buy the dip” is not automatically safer or smarter, and that evidence based trend participation can offer a meaningful edge over opinion driven decisions.
Relative Momentum is designed to identify those leadership trends and participate in them, while avoiding assets showing sustained downtrends.
It doesn’t rely on hoping something will bounce back. It focuses on what the market is actually doing.
And importantly, it recognises that markets move in cycles. Different sectors have different seasons. What’s strong today may be weak tomorrow. A process that adapts can have a meaningful advantage over one that stays static.
The goal isn’t perfection. It’s consistency.
A rules based process isn’t claiming it will pick the top or sell at the exact peak. It’s not trying to.
It’s designed to support consistent decision making under uncertainty.
Because consistency is what most investors actually need.
Not more research. Not more hot takes. Not more confidence. Consistency.
When you strip investing back to its fundamentals, the winners tend to do a few things well:
they avoid catastrophic losses
they stay invested when trends are in their favour
they don’t abandon their plan during volatility
they don’t rely on luck
they understand that discipline compounds
That’s why many systematic investment philosophies emphasise two core principles:
Let winners run. Cut losses early.
It’s not flashy. But it’s effective.
The takeaway: Your biggest investment risk might be you
If there’s one idea worth holding onto, it’s this: Your long term returns aren’t only shaped by what the market does. They’re shaped by what you do in response.
That’s why the strongest investment strategies don’t just focus on performance. They focus on behaviour. Because behaviour determines whether you stay the course, panic, overreact, or abandon a plan at exactly the wrong time.
A disciplined process is designed to protect you from those very human instincts, and to replace uncertainty with structure.
Because when investing feels uncertain, your process needs to feel certain.
And that’s where rules beat feelings.
If you’d like to understand whether a rules based investment approach like Relative Momentum could suit your goals and risk comfort, book a chat with the team at Pathwise Wealth. We’ll talk you through how it works in plain English, and whether it makes sense for your situation.