The last few months have been — for lack of a better word — a masterclass in weathering market volatility. We’ve seen dramatic swings in a short period. Multiple drops have been quickly followed by dramatic recoveries, all driven by policy announcements, economic uncertainty, and changing investor sentiment.

To tell you that my phone has been ringing off the hook would be an understatement.

And while the market movements themselves have been all over the place, those ups and downs pale in comparison to some of my clients’ poor, rattled nerves.

The same investors who were eager to capitalize on opportunities during market highs suddenly want to move large amounts of money into cash during the dips. Then, when markets recover, they’re back to asking about the best growth opportunities.

My clients are all successful executives and high-income business owners who make complex decisions in their careers every day, and they’re not novice investors. Yet when it comes to their portfolios, recent market performance seems to override their long-term financial plans.

This pattern reveals something very important about investing psychology. Even the most successful professionals can allow their emotions to drive their financial decisions, especially when markets get volatile.

Why Smart People Make Emotional Investing Decisions

Nearly all of us make emotional decisions when it comes to our money. It’s human nature! Understanding why we make these emotional decisions, despite our best efforts, is key to helping us stay on track.

The Recency Bias Problem

Human brains are wired to give more weight to recent events than historical patterns. This means last month’s market performance feels more “real” and predictive than decades of market data.

When markets have been volatile, that volatility feels like the new normal, even though historically, markets have always experienced periods of turbulence followed by recovery.

For high-earning professionals, this creates a particular challenge. You wouldn’t make business decisions solely on last quarter’s results. You would take context into account and look back further to understand what you might be able to expect in upcoming quarters.

Yet it’s easy to fall into this trap when it comes to making decisions with your money. The difference is that in your career, you have more control and can often see the direct connection between your actions and your outcomes. Markets, on the other hand, operate independently of your daily efforts and expertise.

FOMO Meets Loss Aversion

The same person who experiences fear of missing out (FOMO) during market rallies will probably also experience intense loss aversion during market declines. Neither emotion is inherently wrong, and both are natural human responses designed to protect us.

But the problem arises when these emotions drive the actual decisions we make with our money.

During market upswings, FOMO can lead to chasing performance or increasing risk exposure unnecessarily and in a way that doesn’t align with your goals. During downturns, loss aversion can trigger the desire to sell when markets are depressed, locking in losses and missing out on subsequent recoveries.

Both reactions feel logical in the moment, but often work against long-term wealth building.

The Success Paradox

Professional success can actually create blind spots when it comes to investing. When you’ve built a successful career through expertise, hard work, and smart decision-making, it’s natural to believe those same skills transfer directly to investment management. And look, successful professionals do have advantages like discipline, analytical thinking, and the ability to see long-term patterns.

However, markets don’t always reward the same approaches that drive career success. While you can influence your professional outcomes through effort and strategy, market movements are largely outside your control. This disconnect can be very frustrating for high achievers who are used to having more direct influence over their results.

A behavioral financial advisor, like yours truly, understands this dynamic and helps clients navigate the psychological challenges that come with market volatility, regardless of their professional success.

The Solution: Behavioral Financial Planning

The first step in managing investing psychology is to recognize when emotions are influencing your decisions. Self-awareness truly becomes your most valuable tool in these moments. For high-income earners, this means acknowledging that the same drive and confidence that fueled your career success can sometimes work against you during volatile markets.

Recently, I’ve had clients call worried about how new economic and legislative policy changes might affect their portfolios (regardless of political affiliation). This anxiety all comes back to uncertainty and the desire to “do something” when markets feel out of control.

Your investment strategy must account for these psychological realities. Any financial plan should anticipate emotional moments and have predetermined responses ready, so you’re not making crucial decisions when emotions run high.

Creating Systematic Approaches

Perfect self-control is impossible. So to keep ourselves on track, we can build systems that remove emotion from the equation. Pre-commitment strategies work because they force you to make decisions when you’re thinking clearly, not when markets are causing stress.

This might involve setting specific portfolio rebalancing schedules regardless of what’s happening in the markets, or establishing rules about when you’ll review your investments. (I’ll give you a hint: It shouldn’t be daily.)

Rules-based decision making takes the guesswork out of volatile periods. Instead of asking “What should I do now?” you can refer to your predetermined plan, which should already outline what to do during market downturns. This approach leverages your analytical skills while protecting against impulsive reactions to market movements.

Understanding investing psychology also means recognizing that markets will always feel uncertain in the moment. What feels like unprecedented volatility today has usually happened before, even if the specific circumstances are different.

Professional Accountability

The second strategy you can employ is to hire an accountability partner. As a behavioral financial advisor, I bring both investing expertise and an objective voice of reason during emotional moments. (Honestly, it’s the accountability part that many of my clients underestimate in the beginning, but are so grateful for now.)

A professional can help you distinguish between genuine changes in your financial situation that warrant portfolio adjustments and emotional reactions to market noise. This outside perspective becomes especially valuable for successful professionals who are used to trusting their instincts and making quick decisions.

When it comes down to it, eliminating all emotional responses to market volatility isn’t possible, nor is it necessarily desirable. But if you can create enough space between your initial emotional reaction and your investment decisions, you’re probably going to be in good shape.

Moving Forward with Confidence

The recent months of market turbulence have been a reminder that even the most successful professionals can find themselves second-guessing their investment strategies when markets get shaky. This is a normal psychological response to uncertainty.

However, understanding investing psychology gives you an advantage. When you can step back and recognize the emotional patterns that influence financial decisions, you’re better equipped to stick with strategies designed to build long-term wealth rather than react to short-term market movements.

At Servet Wealth Management, we specialize in helping high-income professionals navigate both the financial and psychological aspects of investing. If you’re finding that recent market volatility has you questioning your investment approach, or if you want to build more systematic strategies to manage emotional decision-making, we’re here to help.

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Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.

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