Take a moment to ponder about your last investment decision. Did you act confidently, or hesitate and overthink it? Perhaps you felt a rush of optimism after a recent win or were spooked into selling due to something in the headlines. There is this unseen factor many investors overlook: your mind. It’s not your capital at work, but rather your emotions, assumptions and mental shortcuts. And these can cost you dearly, sometimes more than a bad investment choice. The field of behavioural finance, which explores how psychology intersects with investing, has identified consistent patterns in investor behaviour. These so-called “behavioural traps” are common. And while they seem harmless in isolation, over time, they can erode your wealth and decision-making abilities.

When Greed whispers, “just a bit more”

One of the most seductive traps is greed, especially during market highs. Seeing others post wins or watching your own portfolio make new highs, you may think, “Why not invest more? I’ll ride the wave”. But too often, these decisions are made when asset prices are already inflated. Greed distorts logic, feeding on momentum and emotions, rather than fundamentals. When the inevitable correction happens, those late in the game are left with losses. A quick way to check yourself? Ask: “Would I still invest in this if nobody told me about it?”

Acting fast, regretting slowly

Modern life rewards speed. But in investing, haste can be expensive. Many people jump into investments after watching a trending video or getting a message in a group chat. Unlike a bad online purchase, you can’t return a losing stock. Impulsive decisions often skip due diligence. The initial thrill can feel like momentum, but it’s more often a shortcut to disappointment. Before committing yourself, take a pause — sleep on it. A good investment will still be there tomorrow.

I’ll sell it when it gets back to my price.

This thought has echoed in the minds of countless investors. You buy at ₹100; it drops to ₹70, and you hold on, waiting for it to get back. But sometimes it never does. This is loss aversion in action. The pain of losing money is psychologically twice as powerful as the pleasure of gaining it. So, we wait, and wait, tying up money in underperforming assets instead of relocating it to better opportunities. Letting go of a loser isn’t giving up. It’s choosing not to be anchored to the past at the cost of your future.

The heavy hand of regret

Missed an opportunity that later soared? Held onto something too long, and now it’s down? Regret leaves a mark and often influences what you do next. Regret-aversion makes you hesitant to act, for fear you’ll feel worse later. Ironically, this can freeze you into inaction or trap you in outdated strategies. The antidote? Write down your reasons for investing. Clarity brings courage.

Confidence vs. overconfidence

There’s a fine line between being confident and being overconfident. A few good decisions can make you feel like we have a knack for the market. However, this feeling can quickly lead to ignoring advice, chasing trends, and trading too frequently. Overconfident investors tend to underestimate risk and overestimate their insight. This usually leads to under performance in the long term. The best investors always remain curious, humble and grounded.

When headlines shape your portfolio

The media thrives on drama. “Markets up 3000 points? Rally of the year” or “Market down 3000 points? Worst day since last Friday”. This amplifies availability bias, where the most recent, vivid event dominates your thinking. But investing success comes from a long-term perspective, not reacting to every spike or slide. Before making a move, pause and ask: “Has anything truly changed in my plan?”

Following the crowd

Herd behaviour is deeply ingrained in humans. When everyone around you is buying something, it’s challenging not to join in. It feels safer, less risky. But crowds have created every major market bubble in history. Just because something is popular doesn’t make it wise. And just because something is unpopular doesn’t make it wrong. So, make decisions based on your needs, not on someone else’s enthusiasm.

Mood and the markets

Here’s something we rarely consider: our mood. Studies suggest that people are more likely to invest when they are feeling optimistic, on a bright day, after a win in a sporting event, or during holidays. Conversely, bad days or gloomy weather can trigger hesitation or panic. These emotional shifts may feel subtle, but they impact judgement. If your financial decisions seem to fluctuate with your mood, it’s worth taking a step back and re-evaluate your decision.

Mental buckets and dissonance

Another hidden trap? Mental accounting. We often treat money differently, depending on where it comes from; a bonus feels easier to spend than salary. But money is money. These invisible buckets can skew how we invest, save or spend. Tied to this is cognitive dissonance. Once we have decided, especially one tied to our identity of ego, we tend to ignore information that challenges it. We focus only on the positives and rationalize the negatives. This can lead to sticking with bad investments, far longer than logic would suggest. Awareness is the first defence. Understanding that our brains do it by default helps us to pause, reflect and adjust.

So, what can you do?

We don’t need a finance degree to become a savvy investor. What we need is more self-awareness. Start by writing down your goals and what would cause you to change direction. Check your portfolio less often; frequent monitoring can tempt impulsive actions. Discuss major decisions out loud with someone you trust. Usually, clarity comes just from explaining it to another person. And accept this truth: regret is a part of investing. Not every choice will be perfect. But if your process is thoughtful, you are already ahead.

Ultimately, it’s about you

You work hard for the money. You plan, you save and invest. But even the best strategy can fall apart if your mind starts to play tricks with it. The market will always rise and fall — that’s its nature. The difference between the investors who thrive and those who stumble often comes down to behaviour, not brilliance. Because in the long run, it’s not just the market that decides your success; it’s you.

The author is a co-founder of www.investaffairs.com