Aug 3, 2026
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Add us on GoogleDramatic swings in the stock market are hard on retail investors, generating strong emotions that override conventional investing wisdom, such as, “Buy low, sell high.”
According to a June MarketWise survey of 1,002 retail investors, 25% of participants sold an investment during the most recent market drop, only for the market to recover within weeks.
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Emotional investing decisions can have a serious impact on the state of your finances. The 43% of surveyed retail investors who lost money in an emotional trading decision gave up an average of $1,606. However, many retail investors don’t realize they’re making emotional investing decisions in the first place.
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Emotional investing behavior is hard to recognize
FOMO, the fear of missing out, is easy to identify when you come across a photo of your friends on Instagram having brunch without you. However, the survey shows FOMO is much harder to recognize in your investing decisions.
Per the MarketWise survey, 31% of investors say they trade emotionally, but only 20% labeled themselves as an emotional investor. Yet 48% of respondents say they made a FOMO-driven purchase within the last 12 months.
“You’ve got this divide between people who are clearly making emotional decisions, but they’re thinking that they’re not quote, unquote emotional investors,” James Royal, MarketWise investing writer and author of the recent survey, told Moneywise. “That dichotomy is a real indicator of what a pejorative term, ‘emotional investing’ is.”
In denial of their emotional investing, Royal says many retail investors open themselves up to making the same mistakes repeatedly. “They can’t self-correct until they admit the possibility that they are making decisions on emotional grounds,” he said.
Investing decisions as a result of FOMO are especially hard to notice, says CFP Derek Notman, because the decision can take place long after the initial emotion. A missed opportunity may spur retail investors to overcommit to the next opportunity too quickly. “So now they’re like, ‘Okay, I’m gonna hit it this time for sure,’ but all due diligence goes out the window,” Notman told Moneywise.
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Insulate your investments from your emotions
It’s difficult to completely divorce your emotions from your financial decisions. Money, or the lack thereof, is a very emotional topic, and humans are very emotional. “Retail investors tend to operate on herd mentality. That’s how humans act,” Notman said.
The best long-term solution to removing emotion from your investments is to understand what life those investments are meant to serve.
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“Money really is a tool to help you live whatever life you want to live,” Hanna Horvath, CFP and author of financial newsletter Your Brain on Money, told Moneywise. “So what is that life? If you have full conviction on what your values are, what you want your money to do for you, it’s a lot easier to make good financial decisions.”
However, understanding your goals and developing an investment plan in service of those goals takes time and a considerable amount of soul searching, not to mention professional assistance.
In the meantime, Horvath recommends adding friction to slow down any investing decision you make, whether you wait 24 hours before investing in a stock or distancing yourself from the source of your investing impulses, like investing advice on Reddit or from an investing influencer. Lastly, “it really is in your best interest to not be checking your portfolio every single day.”
As for the drastic shifts in the market, Notman says the best course of action is often to ignore them and keep your eyes on the long-term horizon.
“It’s really easy to get scared and emotional about these things,” Notman says. “If you have a financial plan and you are invested appropriately for your time horizon, then you’re going to be able to weather these storms.”
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Paul Kim is a Brooklyn-based freelance writer and editor. He has spent much of his career in service journalism, helping readers make smart decisions, whether they’re looking for the best pet insurance or a great place to grab lunch.
