How emotional investing can lead you astray

Emotional investing isn't a reliable path to financial success. In fact, emotion-led trading choices can make you fall prey to herd mentality by selling or buying at suboptimal moments. Anyone who has been investing for a while knows that stock markets have their ups and downs. Take 2019, for example, when it was party time on the stock market and investors were celebrating. Then in 2020, the coronavirus broke out and the stock market crashed. The start of the war in Ukraine (2022) and Donald Trump's import tariffs (2025) also caused significant stock market dips, interspersed with periods of recovery. In short, things can change quickly. Especially if you haven't been investing for very long, fluctuations in stock market prices can cause quite the rollercoaster of emotions.

Whatever happens on the stock market, staying calm, not letting your emotions get the better of you and persevering is the best thing you can do. In fact, emotions and smart investment choices can feel very contradictory. This graph clearly shows how the emotional rollercoaster works when investing.

Optimism and enthusiasm

When stock prices start to rise, many investors feel optimistic because they see the value of their investments growing. People are often inclined to buy more in the hope that they can profit from the increase in value.

Euphoria

The higher the price, the better the mood on the stock market. Especially when the value of investments reaches a peak, many investors are almost beside themselves with joy.

Euphoric as they are, they invest more, even though this is the riskiest time to do so. When the stock market reaches a peak, shares are logically at their most expensive. If you enter or buy at that point, you are most likely to lose money later on.

Concern and fear

When prices start to fall, many investors begin to worry. If this continues for a while, concern can even give way to fear. This is what is happening to some investors now as a result of the coronavirus crash we are currently experiencing. Fear is a poor advisor, and it is important to keep your long-term goals in mind. History shows that stock market prices have always risen over time.

Panic and surrender

If prices continue to fall and recovery is slow in coming, investors can become desperate. The resulting panic can cause investors to sell their investments at a loss to avoid further losses. However, because you only incur a loss when you sell at a loss, it is better to keep a cool head and wait until the bottom has been reached. Then the price will start to recover.

Depression

At the lowest point of the stock market, many investors are in despair. The clouds above the investment world are grey and they are at a loss. Depressive feelings set in and it seems as if the tide will never turn. Other investors do not want to get their hands burned by new investments because they think there is nothing to be gained. Strangely enough, the opposite is true: historically, stock prices have always recovered and sunshine follows rain. The low point often offers the best opportunities to get in, because you can buy at the most favourable prices. This is where you could achieve the highest returns in the future.

Hope and optimism

When the stock market picks up again after a low point, investors regain their enthusiasm. The hope of a good return slowly flows through their veins again. They then return to the stock market with a sense of relief and look for promising potential investments. From that point on, the whole investment rollercoaster starts all over again.

Do the emotions in the investment rollercoaster above sound familiar?

Don't let them drive you crazy. The best thing you can do if you invest in a diversified way, as you do with Peaks, is to make regular contributions.

Regardless of what the stock market is doing. That way, you know one thing for sure: you are buying when stocks are cheap and when they are expensive (you can't predict when the peak or trough will be). And because, as mentioned earlier, prices have always risen so far, your pot will grow in the long term.

Be aware that investing involves risk and that you could lose (part of) your investment.

This article was updated on 24 June 2025.