How to Better Avoid Investment Mistakes

We like to believe that financial and economic choices are born entirely of cold, rational logic. In reality, human beings are highly emotional decision-makers. Behavioral economists at Gallup found that roughly 70% of consumer and economic choices are driven by emotional factors, while only 30% are purely rational.¹

Compounding this emotional reality is a psychological trap known as action bias—our innate human preference for activity over inactivity. We instinctively want to do something, even when doing nothing is the statistically superior choice.

This urge to act intensifies dramatically during periods of market volatility or portfolio loss. When we see our account balances drop, fear triggers a survival instinct that screams at us to intervene. Unfortunately, in capital markets, giving in to this urge usually leads to poor investment choices, like panic-selling at market bottoms or chasing speculative trends.²

Defending Wealth with Patience and Planning

Are we doomed by human nature to be poor long-term investors? Not if we build a proper defense using two core disciplines:

• Patience: In an investing context, patience is the learned capacity to remain calm in the face of temporary market drops. Patient investors recognize that volatility is simply the "fee" required to capture equity market returns. By maintaining a steady hand, you drastically reduce the role that temporary emotions play in your lifelong financial trajectory.

• Planning: A well-crafted financial roadmap is your ultimate weapon against action bias. When you design a structured investment plan with a trusted professional, you establish clear rules for your capital before the chaos of a market storm hits.

Developing a plan with an advisor also adds an invaluable layer of behavioral accountability. During an inevitable market downturn, your advisor serves as a sounding board—a rational voice to lean on when the collective crowd is panicking.

Ultimately, successful investing is counterintuitive. There are many moments where doing absolutely nothing is the most productive, wealth-maximizing action you can take. One Day In July financial advisors build personalized, low-cost investment plans designed to support your patience, neutralize action bias, and protect your long-term compound growth.

1. Gallup (2022). Customer Brand Preference and Decisions: Gallup's 70/30 Principle. Gallup Analytics. (Research establishing that approximately 70% of consumer economic and behavioral choices are driven by emotional, psychological factors rather than purely rational calculations). https://www.gallup.com/workplace/398954/customer-brand-preference-decisions-gallup-principle.aspx
2. James Montier (2010). The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy. John Wiley & Sons. (Detailing the mechanics of action bias, loss aversion, and the psychological impulses that sabotage portfolio performance during market downturns). https://www.wiley.com/en-us/shop/general-finance-investments/the-little-book-of-behavioral-investing-how-not-to-be-your-own-worst-enemy-p-9780470686027#description-section