The seven deadly investing sins – and how we help clients avoid them
The biggest threat to investment success is often not the market - it's our own behaviour. Paul Derrien, Divisional Director, explores the seven deadly investing sins and explains how we help clients avoid the emotional decisions that can undermine long-term returns.
Divisional Director (London)
27 Jul 2026
|Quick summary
Fear, greed, overconfidence and FOMO can all derail even the best investment plans. Paul Derrien, Divisional Director, who manages portfolios on behalf of clients, explains the ‘seven deadly investing sins’ that can influence investment decisions and how disciplined portfolio management helps keep client portfolios focused on long-term goals.
Traditional economics assumes markets are rational. Anyone who has spent time investing knows otherwise.
Markets are driven by humans - and human-programmed computers - and humans are emotional, inconsistent and heavily influenced by those around them. As any Spinal Tap fan will know, things have a habit of turning up to 11 when emotions take over. The result? Even experienced investors can make predictable mistakes that damage long-term returns.
This is where behavioural investing matters. By understanding how emotions such as fear, greed, regret and overconfidence can affect decision-making, investors can put better disciplines in place and avoid common investing mistakes.
Here are seven investing behaviours that can negatively impact long-term returns - and the disciplines we use to help clients avoid them.
Sloth: have we done enough investment research?
We try not to simply ‘feel’ positive about a company. It's easy to find reasons everyone else already knows about, whether it's a fashionable growth story or an attractively priced value stock.
Good investing for clients starts with understanding why the future earnings of a company could exceed expectations, not simply relying on tips, headlines or momentum.
It can also be tempting to be persuaded by a compelling investment story told by the companies themselves. Corporate presentations can be informative, but they should form part of our investment research process rather than replace it.
Key lesson: Thorough research underpins good client outcomes.
Greed: are we frightened of missing out?
FOMO appears in many forms.
It can mean chasing hot stocks, funds or investment themes long after everyone else has piled in. It can also mean refusing to take profits from successful investments because you convince yourself they can only keep rising.
The same emotion drives excessive trading. Investors have become increasingly twitchy as information becomes more accessible and markets move faster. Average holding periods for stocks are far shorter than they used to be.
The reality is that market timing is incredibly difficult. Often, it's time in the market, a long-term investment approach and the power of compounding that matters most.
Key lesson: Disciplined portfolio limits help prevent excitement from dictating investment decisions.
Pride: nobody gets investment decisions right all the time
Humans consistently overestimate their abilities.
Research suggests 80%-90% of people believe they are better-than-average drivers1. Most also think they are more intelligent than average2.
Investing is no different.
We don’t always assume we have spotted something the rest of the market has missed. One famous fund manager once remarked that it takes 15 years to know whether you are skilled rather than lucky.
If we enjoy a strong run of performance, we also keep some humility - sticking to our process and remembering that luck and skill often look remarkably similar over shorter periods.
Key lesson: Confidence is valuable. Overconfidence can be costly.
Lust: don't fall in love with an investment
Successful investments can become emotional attachments.
The longer they perform well, the harder they are to sell. Before long, portfolios can become concentrated in a handful of favourite holdings.
That's why we apply discipline around position sizing, profit taking and valuation when managing client portfolios. When a company becomes too large or too expensive relative to its prospects, reducing exposure should be a process, not an emotional decision.
As with relationships, sometimes a clean break is healthier than staying attached for too long.
Key lesson: Love your returns, not your investments.
Gluttony: the risk of over-diversification
Diversification is essential.
Over-diversification, however, can become a problem. With thousands of funds and companies available, many investors end up owning far more than they need.
Beyond a certain point, adding more holdings can deliver diminishing diversification benefits while making portfolios harder to monitor and manage effectively.
A portfolio should be thought of as a team rather than a list of individual investments. The objective isn't to own as many players as possible, but to ensure each one has a clear role to play.
That is why we focus on ensuring portfolios are appropriately diversified, rather than simply adding more holdings for the sake of it.
Key lesson: Build a portfolio that is diversified, not bloated.
Envy: stop comparing your portfolio to others
There will always be somebody who has done better.
A neighbour who bought the perfect stock. A colleague whose portfolio outperformed. A benchmark that climbed further than yours.
The trouble is that every client has different objectives, different risk tolerances and different time horizons for investing.
The only meaningful comparison is whether your portfolio is helping you meet your objectives.
Key lesson: Measure success against your plan, not someone else's.
Wrath: don't let emotions drive investment decisions
Market falls test investors more than rising markets ever do.
Losses feel more painful than gains feel rewarding, which is why some investors develop an uncanny ability to sell near market bottoms.
Similarly, frustration after a poor decision can lead to revenge investing - doubling down on losing positions or making rushed decisions to recover losses quickly.
When markets become volatile, our role is to remain disciplined and keep long-term plans on track. Some investors even write themselves a note during calm periods, outlining how they will respond when markets inevitably become more volatile.
As Warren Buffett famously said: "Be fearful when others are greedy and greedy when others are fearful."
Key lesson: Make decisions reflectively, not reactively.
How professional investment advice helps
A common theme runs through all seven sins: investing is rarely undermined by a lack of information. More often, it is undermined by emotion.
A Wealth Planner or Investment Manager does more than select investments for your portfolio. They provide a framework for decision-making, challenge assumptions and keep long-term plans on track when emotions threaten to take over.
Whether it is diversification, tax planning, retirement planning, inheritance tax considerations or simply providing a second opinion, a large part of our role is helping clients avoid the emotional decisions that can damage long-term outcomes.
For me, this is the most important point of all: having someone to sense-check your decisions, guide you through market cycles and help you make difficult choices can be invaluable when emotions make those decisions feel harder.
1[PDF] ARE WE ALL LESS RISKY AND MORE SKILLFUL THAN OUR FELLOW DRIVERS | Semantic Scholar
Need help avoiding emotional investment decisions for your clients?
Emotional investing mistakes are often easy to spot in hindsight but much harder to avoid in the moment. That's where an experienced Wealth Planner or Investment Manager can make a real difference - providing perspective, challenging assumptions and helping your clients stay focused on their long-term goals, even when markets feel uncertain.
FAQs: emotional investing and common investment mistakes
Common investing mistakes include chasing recent winners, trying to time the market, becoming overconfident after short-term success, holding too many investments, failing to diversify properly and letting fear or greed drive decisions.
Emotional investing can lead investors to buy when markets feel exciting and sell when they feel uncomfortable. This can result in poor timing, unnecessary trading and decisions that move a portfolio away from its long-term objectives.
Professional investment management can provide structure, research, portfolio discipline and an objective view during periods of market uncertainty. This can help investors avoid emotional decisions and keep their portfolio aligned with their goals and risk appetite.
