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Are Your Emotions Driving Your Portfolio Off a Cliff?

Peter Kariuki November 12, 2025 5 min read
Are Your Emotions Driving Your Portfolio Off a Cliff?

How To Stop Fear, Greed & FOMO From Crippling Your Investing Success

When you feel fearful during a market drop, excited when stocks surge or anxious as others seem to be getting rich — your emotions are steering your portfolio. In this article we explore how emotional investing—fear, greed, herd-behaviour, FOMO—can drive your portfolio off a cliff, why it happens (thanks to behavioural finance), and the concrete steps you can take to regain control and build a disciplined, long-term investing plan.

You open your investment app. The market’s down – and you feel a knot in your stomach. A few weeks later the market is soaring, your phone buzzes with “hot tip” messages, and you feel like you’re missing out. Sound familiar? That’s your emotions driving your portfolio. In the language of behavioural finance, your fear, greed and FOMO might be steering decisions that conflict with your long-term goals. The good news? By recognising the emotional traps, you can adopt strategies to avoid them—and keep your investing journey steady.

In this article we’ll:

  • unpack how emotions interfere with investing
  • show how these mistakes play out in real portfolios
  • offer practical remedies you can apply right away
  • keep the tone human, simple and actionable.

What behavioural finance reveals about emotional investing

The field of Behavioural Finance shows us that investors are not always the cool-headed, rational calculators of textbooks. Instead, psychology plays a big role in how people buy and sell.

For example:

  • Emotions such as fear (when the market drops) and greed (during rallies) can push investors to act when they should stay still.
  • Cognitive biases like loss aversion (we feel losses more than gains) distort decision-making.
  • Herd behaviour and FOMO (fear of missing out) prompt us to follow others into crowded trades rather than sticking to our plan.

In other words: your brain may trick you into acting at the worst possible time.

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How emotions drive portfolios off the cliff

Here’s how it happens in practice:

a) Buying high, selling low

When the market is booming, emotions take over. You see others making money, you feel “if I don’t jump in I’ll miss out”, so you buy. But when you invest at peak optimism, you’re exposed to bigger corrections. Then when the market turns, fear kicks in — you sell, often at a loss, just as it begins to recover. Research shows this pattern leads to under-performance.

b) Over-trading and chasing themes

Greed, hype, FOMO. These drive many investors into hot sectors or “the next big thing” without proper analysis. The result: timing risk, concentration risk and often bigger losses than expected. Studies show that behavioral biases lead to aggressive trading mistakes.

c) Holding onto losers, letting winners go

Because we hate losses more than we enjoy gains, many investors hold on to bad investments (hoping for a rebound) and sell winners too early (to lock in gains). That bias, known as the disposition effect, shows up in portfolios.

d) Ignoring your long-term plan

When emotional reactions dominate, you stray from your goals. You may ditch your asset allocation, jump in and out of markets, or assume more risk than you planned. Over time this erodes wealth building and increases stress.

Recognising your emotional investing triggers

Before you can fix the problem, you must identify it. Ask yourself:

  • Do I panic-sell when markets drop, or hold no matter what?
  • Do I buy impulsively when I see headlines “everyone’s winning”?
  • Do I feel left out when others are making money (FOMO)?
  • Do I constantly check my portfolio and react to every twitch?
  • Have I ever abandoned a plan because “it just doesn’t feel right anymore”?

If you said “yes” to any of these, your emotions are influencing your portfolio.

Read Also: Why Your Business is Losing Ksh 2.2 Million Annually in Idle Bank Cash

How to stop emotions steering your portfolio off the cliff

Here are practical, human-centred steps you can apply:

a) Start with a written plan

Define your goals, risk-tolerance, time-horizon, and how much you’ll invest regularly. When emotions creep in, the plan acts as a stabiliser.

b) Automate your investing

By scheduling regular contributions and automatic rebalancing, you remove timing risk and emotional decision-making. Research shows disciplined systems reduce emotional damage.

c) Diversify and stay grounded

Avoid putting all your eggs in one hype basket. Spread across asset types, sectors, geographies. That gives you resilience when fear or greed strike.

d) Recognise your biases

Just being aware of behaviours like herd-mentality, anchoring (fixating on a past price), confirmation bias (only hearing what supports your view) helps.

e) Re-frame downturns as opportunities

When markets drop and fear kicks in, ask: “Is this an opportunity to add?” Rather than automatic sell. Mindset matters.

f) Limit exposure to noise

Stop checking headlines every hour. Limit how often you review your portfolio so short-term volatility doesn’t trigger a rash decision.

g) Work with an advisor/coach if needed

A competent advisor can help you maintain discipline and keep emotions in check. Studies show this adds value in emotional investing contexts.

Why this matters for you (especially in Africa)

Whether you’re investing for retirement, building a nest egg, or seeking to grow wealth in Kenya or across Africa, emotional investing risks are the same. In fact, given volatile markets, emerging economies and high growth potential, staying disciplined matters more.

If your portfolio gets driven off a cliff because of emotion:

  • you may fail to reach your long-term goals
  • you may take on unknown risk and expose yourself to big losses
  • you may miss the benefit of compounding because you’re out of the market at the wrong time

By mastering your mindset, you build not just a portfolio — you build a future that aligns with your dreams.

Read Also: Why Most African Startups Fail After Securing Funding

Final thoughts

The next time you feel your pulse quicken because of a headline or a social-media investing tip, pause. Ask: “Am I acting from a well-thought plan or from fear/greed/FOMO?” If it’s the latter — your portfolio might be heading towards a cliff.

But here’s the good news: by implementing the practical steps above, you can turn your emotions from enemy into ally. You can stay grounded in your goals, use psychology to your advantage, and avoid the most common investing mistakes that derail wealth.

Your portfolio doesn’t have to be a roller-coaster driven by emotions. It can be a vehicle of steady, disciplined growth. Are you ready to drive it, instead of letting your emotions take the wheel?

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