Mind Over Markets: "Rational" Investors Always Trip on the Same Wires

Lee Scully

April 10, 2025

The World Changes, But People Don’t: Mastering the Psychological Patterns of Investing

History doesn’t repeat itself exactly, but it certainly rhymes. And yet, investors keep making the same mistakes—not because they lack intelligence, but because human nature is stubbornly consistent. Greed, fear, overconfidence, and herd mentality are wired into us, leading to predictable missteps. Recognizing this pattern, and learning to work against it, is a powerful advantage in investing.

The Psychology of Market Cycles

Most investors like to think they’re rational, but the market tells a different story. It moves on emotions, not logic. “Buy low, sell high” sounds easy enough, but in reality, fear makes people sell at the bottom, and greed makes them buy at the top. The cycle repeats, decade after decade. Those who recognize it can position themselves advantageously rather than reacting emotionally.

Take a moment before making an investment decision—just like you would in a conversation. A pause to think before speaking often leads to a clearer, more thoughtful response. The same applies to investing: a moment of reflection can separate impulse from strategy, emotion from logic.

The Illusion of Stability

We assume the future will look like the past because it’s comforting to believe so. Investors fall into this trap all the time. Interest rates have been low for years, so they assume they’ll stay low. The U.S. dollar has been the world’s reserve currency for decades, so they assume it always will be. The “60/40” portfolio has worked, so they assume it will keep working. These were never guaranteed constants.

But history teaches us otherwise. Change is inevitable. The systems we rely on today could look entirely different in 20, 50, or 100 years. Maybe even in one year, at the rate things are changing today. Many investors operate within frameworks that worked for the last several decades but may prove catastrophic for the next several. Those who succeed will be the ones who acknowledge uncertainty, adapt, and think independently.

Kicking the Can Down the Road: Pain Avoidance

As humans, we’re wired to avoid pain—whether it’s physical discomfort or financial loss. On a larger scale, this plays out in economic policy—governments and central banks prop up markets with interventions that mask and defer problems rather than solve them. They kick the can down the road. New money printing, stimulus programs, artificially low interest rates—these are problem deferral mechanisms that actually make things worse in the long run. And eventually, the bill comes due. The financial hangover sets in.

Investors who recognize this won’t be caught off guard, when the market shifts dramatically. They’ll already be hedged against the inevitable corrections.

Leaving the Herd for Greener Pastures

Most people follow the herd. It feels safer, natural. But in investing, safety is often an illusion. Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful.” It’s simple in theory but proves difficult in practice – few can actually operate this way, which is why few succeed to a fraction of the degree Buffett has. It takes courage to step away from the crowd.

And then there’s the power of admitting, “I don’t know.” Many investors chase certainty, as if they can predict the future. If someone says, “I know for sure,” run the other way. There is no crystal ball. The best investors accept this and instead focus on probabilities: This is what I think. This is why. Could I be wrong? Yes. How do I protect against that? Hedge my bets. Don’t bet the farm.

Process Over Emotion

Investing is simple in theory—allocate capital systematically, based on recurring patterns. The challenge lies in resisting psychological impulses that interfere with disciplined execution. Investors must recognize where they stand in long-term market cycles (zoom way out), remain detached from emotions, and commit to a structured approach.

Think of investing like a golf swing. If you stick to good fundamentals, you’ll be in good shape. If you let nerves take over, you’ll slice it into the trees, or, worse, into the pond. The best investors, like the best athletes, trust their process, even when the world is chaotic around them.

Zoom Out

Take a moment. Pause. Breathe. Zoom out (a core mantra in our group). Think about how much the world has changed in just the past few decades. Now, imagine what the next few could bring. Think about what truly matters to you today. Are you investing as if things will stay the same? Or are you preparing for (inevitable) change?

The world changes. People don’t. Recognizing that simple truth is what separates successful investors from the herd.

Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Lee Scully, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member Canadian Investor Protection Fund.