--- title: "How emotions impact investing: The importance of being a disciplined investor" description: Discover how emotions affect investment decisions and why a disciplined approach, supported by a financial adviser, can lead to better long-term returns. image: https://www.strategyfirst.com.au/hubfs/How%20Emotions%20Impact%20Investing%20The%20importance%20of%20being%20a%20disciplined%20investor.png --- - 02 9091 0080 - contact@strategyfirst.com.au - - [![lzsk3cui](https://www.strategyfirst.com.au/hs-fs/hubfs/lzsk3cui.png?width=400&height=104&name=lzsk3cui.png "lzsk3cui")](https://www.strategyfirst.com.au/) - About us - [Who we are](https://www.strategyfirst.com.au/our-values-0) - [Meet the team](https://www.strategyfirst.com.au/en-au/meet-the-team) - [Why partner with Strategy First](https://www.strategyfirst.com.au/partering-with-us) - [Client testimonials](https://www.strategyfirst.com.au/testimonials) - [Investment commitee](https://www.strategyfirst.com.au/investment-commitee) - Information - [Who we can help](https://www.strategyfirst.com.au/who-we-can-help) - [Our services](https://www.strategyfirst.com.au/how-we-can-help) - [Packages & pricing](https://www.strategyfirst.com.au/service-offerings) - [Financial planning process](https://www.strategyfirst.com.au/process) - [Our community](https://www.strategyfirst.com.au/our-community) - [Learn more](https://www.strategyfirst.com.au/information) - [FAQs](https://www.strategyfirst.com.au/faqs) - [Aged Care](https://www.strategyfirst.com.au/aged-care-strategy-first) - [Blog](https://www.strategyfirst.com.au/blog) [Contact Us](https://www.strategyfirst.com.au/contact-page) [![Strategy First](https://www.strategyfirst.com.au/hs-fs/hubfs/INDEPENDENT%20FINANCIAL%20ADVICE-3.png?width=150&height=56&name=INDEPENDENT%20FINANCIAL%20ADVICE-3.png "Strategy First")](https://www.strategyfirst.com.au/) [Contact Us](https://www.strategyfirst.com.au/contact-page) - About us - [Who we are](https://www.strategyfirst.com.au/our-values-0) - [Meet the team](https://www.strategyfirst.com.au/en-au/meet-the-team) - [Why partner with Strategy First](https://www.strategyfirst.com.au/partering-with-us) - [Client testimonials](https://www.strategyfirst.com.au/testimonials) - [Investment commitee](https://www.strategyfirst.com.au/investment-commitee) - Information - [Who we can help](https://www.strategyfirst.com.au/who-we-can-help) - [Our services](https://www.strategyfirst.com.au/how-we-can-help) - [Packages & pricing](https://www.strategyfirst.com.au/service-offerings) - [Financial planning process](https://www.strategyfirst.com.au/process) - [Our community](https://www.strategyfirst.com.au/our-community) - [Learn more](https://www.strategyfirst.com.au/information) - [FAQs](https://www.strategyfirst.com.au/faqs) - [Aged Care](https://www.strategyfirst.com.au/aged-care-strategy-first) - [Blog](https://www.strategyfirst.com.au/blog) [Contact Us](https://www.strategyfirst.com.au/contact-page) # How emotions impact investing: The importance of being a disciplined investor [Christopher Gilmour](https://www.strategyfirst.com.au/blog/author/christopher-gilmour) 5 June 2026, 12:00:00 pm AEST Investing is often described as a numbers game, but in reality, it’s just as much about psychology as it is about maths. Markets move on data; investors move on emotions. Fear, greed, and overconfidence can lead to decisions that feel right in the moment but cost dearly over time.   ## ![](https://www.strategyfirst.com.au/hs-fs/hubfs/image-png-Dec-11-2025-12-52-12-3267-AM.png?width=250&height=181&name=image-png-Dec-11-2025-12-52-12-3267-AM.png)   Table of Contents  [The Cost of Emotional Decisions](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#cost) [The Long-Term Impact of Behaviour](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#long-term) [Why Do Investors Underperform?](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#underperform) [The Adviser Advantage: More Than Investments](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#adviser-advantage) [What Is That Worth in Numbers?](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#worth) [The Bottom Line: Discipline Pays](https://www.strategyfirst.com.au/blog/how-emotions-impact-investing-the-importance-of-being-a-disciplined-investor#summary)   ## The Cost of Emotional Decisions Decades of research shows that emotionally driven decisions, such as panic selling during downturns or chasing “hot” stocks during rallies, are among the biggest drags on investor performance. The DALBAR Quantitative Analysis of Investor Behaviour (QAIB) report, widely regarded as a benchmark for measuring investor behaviour, highlights this gap clearly: - In **2024**, the **S&P 500 returned 25.05%**, yet the **average equity investor earned just 16.54%**. That’s a staggering **8.48 percentage point** **gap**, driven largely by poor timing decisions and behavioural biases.  Investors were pulling money out of equity funds every quarter, with the largest outflows occurring just before a major surge in returns. - Fixed income investors fared no better. The Bloomberg U.S. Aggregate Bond Index gained **1.25%**, while the **average fixed-income investor** **lost 1.07%**, again due to behaviour-driven missteps. The chart below looks at equity returns over the three calendar years 2022 to 2024, comparing returns available for investors (the S&P 500) and what they actually participated in on average:   ![How emotions impact investing: The importance of being a disciplined investor](https://www.strategyfirst.com.au/hs-fs/hubfs/image-png-Dec-11-2025-12-38-06-5161-AM.png?width=600&height=455&name=image-png-Dec-11-2025-12-38-06-5161-AM.png)   In bad years and good years, the average investor still struggles to make effective investment decisions. If, for example, you were to look at your $1,000,000 of capital at the start of that period, the average investor would have fared as follows:   ![How emotions impact investing: The importance of being a disciplined investor](https://www.strategyfirst.com.au/hs-fs/hubfs/image-png-Dec-11-2025-12-38-59-1843-AM.png?width=700&height=450&name=image-png-Dec-11-2025-12-38-59-1843-AM.png)   Over that three-year period, the market investor ended up with **16.54% more capital** than the average investor - equivalent to **$183,574** on a $1,000,000 portfolio. Imagine leaving that much money on the table purely because of timing and emotional decisions. Even if you then manage to avoid further emotionally driven decisions from the end of 2024, the compounding impact of missing out on that 16.54% remains significant. If markets deliver **7.5% p.a.** over the subsequent 10 years and you now earn that full 7.5% (i.e. you no longer fall into the same behavioural traps), the **initial $183,574 shortfall widens to $378,351** over the next decade. This is why we view these behavioural mistakes as a **permanent loss of capital**, not just a temporary setback.   ## The Long-Term Impact of Behaviour Over longer periods, the picture is even more sobering. DALBAR’s long-term studies have shown that over 20-year horizons, the **average equity fund investor** often earns annualised returns of around **4-5%**, compared to **9-10%** for the S&P 500. That gap compounds dramatically over time and translates into **hundreds of thousands, or even millions, of dollars** in lost wealth for long-term investors. For example, over the 20 years to 31 December 2024: - **$1,000,000 invested in the S&P 500** would have grown to approximately **$6,606,232**, achieving an average annual return of **9.9% p.a.** - **The average investor**, achieving **4.8% p.a.** on average, would have seen their $1,000,000 grow to just **$2,554,028** over the same period. That’s a difference of **$4,052,204 -** a life-changing amount of capital. Letting markets do the heavy lifting for you makes a staggering difference. The challenge is that we often get in our own way. ![How emotions impact investing: The importance of being a disciplined investor](https://www.strategyfirst.com.au/hs-fs/hubfs/image-png-Dec-11-2025-12-53-35-3527-AM.png?width=350&height=236&name=image-png-Dec-11-2025-12-53-35-3527-AM.png)   ## Why Do Investors Underperform? The primary culprit is emotion. Behavioural finance research has identified several recurring biases: - **Loss Aversion**: Fear of losing money leads to selling during downturns. - **Herding**: Chasing trends and buying at market peaks. - **Overconfidence**: Overestimating ability to time the market. - **Recency Bias**: Assuming recent trends will continue indefinitely. These behaviours often result in buying high, selling low, and making frequent changes - exactly the opposite of what successful, long-term investing requires. Over time, these actions can crystallise into a **permanent loss of capital**. It is easy to fall into the trap of thinking: “*But I’m not like everyone else*”.  Unfortunately, that confidence is itself a classic behavioural bias. The good news is that you can: 1. Be different from the average investor, **and** 2. Achieve a great investment outcome that supports the life you want. A key way to do this is by putting a structure and a professional in place between your emotions and your money.   ## The Adviser Advantage: More Than Investments This is where a financial adviser can add real value - not just in portfolio construction, but as a **behavioural coach**. A good adviser helps you: - Stay disciplined through market ups and downs - Stick to a well-considered, long-term strategy - Avoid costly, emotionally driven decisions at critical moments Think of your Adviser as a **sounding board and “sanity check”** before impactful decisions are made. When clients contact us wanting to make a change, we, typically: 1. Understand what’s driving the concern or impulse (fear, excitement, anxiety). 2. Help them understand the implications of the decision. 3. Revisit their objectives and the long-term plan. 4. Provide context and reassurance around market movements and portfolio design. When we do this, **the vast majority of clients, about 99%, ultimately stick to their plan** rather than acting on short‑term emotion.   ## What Is That Worth in Numbers? According to the **Russell Investments “Value of an Adviser” Study**, financial advisers can add **up to 5.7% in value annually** through a combination of: - Behavioural coaching (helping clients avoid panic selling and performance chasing) - Tax‑smart strategies - Appropriate asset allocation - Regular and disciplined rebalancing In Australia, various studies suggest that working with a financial adviser can increase annual returns by around **1.5% to 3%**, even after accounting for fees. For investors with substantial portfolios or complex affairs, this can mean **tens or hundreds of thousands of dollars** more over time, simply by capturing more of what markets already offer and avoiding self-inflicted damage.   ## The Bottom Line: Discipline Pays Markets will always fluctuate. Emotions will always be part of the human experience. The real question is whether those emotions sit **in the driver’s seat** of your investment decisions. The evidence is clear: - Emotional decisions create a persistent gap between **market returns** and **investor returns**. - That gap compounds into a permanent loss of capital over time. - A disciplined framework, supported by an independent adviser, can help close that gap. If you want to capture more of what the market offers (and avoid the pitfalls of emotional investing) consider partnering with a **qualified, independent financial adviser** who can act as a **Fiduciary for your wealth**, sitting on your side of the table. In the end, it isn’t about beating the market every year. It’s about **giving yourself the highest probability of achieving your goals**, with less stress and more confidence along the way. *The information provided is factual only and does not constitute financial advice. 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