The Top 9 Questions Every Investor Should Ask Themselves

Investing is often seen as a purely rational pursuit—analyzing data, making calculated decisions, and expecting consistent outcomes. Many times, when an outcome is not what we expected, we often tell ourselves there was one or two pieces of data we inadvertently left out of our analysis. The next time we may feel all we need is to ask one more question or look at one additional data point. After all, if we can do more work than the “average” investor, we can have above- average returns, right? But the reality is that our emotions play a significant, often underappreciated, role in how we approach investing. Our emotions cannot be seen like data on a performance table or a trend on a chart. And even when we know we have a certain tendency or behavior, we cannot quantify it. From fear during market downturns to overconfidence after a streak of success, emotional responses can cloud judgment, leading to costly mistakes. Being honest about how emotions influence decisions is the first step toward becoming a more disciplined investor.

In this post, you'll discover the top emotional questions every investor should ask themselves. I have personally observed the unfortunate results investors often get from not asking themselves these questions. When I look in the mirror myself after an investment did not turn out well, I often find that I was not answering them honestly. These questions help us uncover hidden biases, understand how emotions may be affecting our investment outcomes, and develop strategies to manage those feelings. By the end of this post, you'll have a clearer understanding of how to align your emotional mindset with your long-term financial goals, setting yourself up for more consistent and confident investing.

1. Am I Too Attached to My Past Decisions?

Why This Question Matters:

Emotional attachment to past investment decisions, especially those that didn’t perform well, can lead to a reluctance to cut losses or change strategies. This is known as the sunk cost fallacy. Mentally we can tell ourselves that until we sell or change a strategy, then it technically was not a bad decision. We tell ourselves there is still time to prove ourselves right, and since all markets go up and down over shorter periods, we almost always have a period that justifies the waiting. Holding onto losing investments out of a desire to avoid admitting mistakes can prevent you from reallocating capital to more promising opportunities. Additionally, attachment to past winners can result in an over-concentrated portfolio, increasing risk. By clinging to past decisions, you may miss out on new information that could inform better choices. Recognizing and overcoming this attachment is essential for staying flexible and making rational, forward-looking investment decisions.

Steps to Help:

Review Underperforming Investments: Ask yourself “Would I buy the same asset today?” If the answer is no, it may be time to sell.
Separate Emotion from Logic: Practice viewing your portfolio objectively. Consider discussing your decisions with a trusted friend or advisor for an unbiased perspective. Ask yourself “What could they know about this that I do not know because of my different investment experiences?”

2. Am I Investing Based on Confidence or Overconfidence?

Why This Question Matters:

Confidence is an important trait for any investor, as it allows you to stick to your strategy and make decisions without hesitation. However, overconfidence can be dangerous, leading to excessive risk-taking and ignoring important red flags. The reason this is such a problem is because many times an investment can go up soon after a purchase, thereby hardening your belief that you must be smart. Overconfident investors tend to underestimate risks and overestimate their ability to predict market movements, which can result in significant losses. This mindset may also cause an investor to forgo diversification, believing they have superior stock-picking skills. By distinguishing confidence from overconfidence, you can ensure that your decisions are grounded in research and rational analysis rather than ego. Striking the right balance helps maintain a healthy level of risk-taking and prevents costly mistakes.

Steps to Provide Answers:

Test Your Assumptions: Before making an investment, write down why you believe it will succeed. Revisit these assumptions regularly. As new data and information comes in, then update your beliefs.
Diversify Risk: Make sure that no single investment represents a large portion of your portfolio.

3. How Do I Handle Losses Emotionally?

Why This Question Matters:

How you respond to losses can dictate future success. Emotional responses to losses often lead to abandoning sound strategies. The very best long-term investors are right, maybe 60% of the time. Are you prepared and have emotional confidence, to be wrong about an investment at least four times out of ten? When emotions drive decisions, investors may sell at the worst possible time, locking in losses and missing potential recoveries. Furthermore, an inability to handle losses can lead to a cycle of fear-driven investing, where you either avoid risk altogether or chase safer assets with lower returns. Additionally, we may feel we have to “make up” for a big loss with our next investment. This behavior hinders long-term wealth accumulation. Learning to manage emotions during downturns is key to maintaining a steady hand and sticking to your long-term plan. A well-executed plan can withstand short-term fluctuations, but only if you remain emotionally disciplined.

Steps to Provide Answers:

Acknowledge Losses as Part of Investing: Understand that losses are inevitable in investing. There is just no way to avoid them.
Focus on Process, Not Outcome: Evaluate whether you followed your investment plan, rather than focusing solely on the result.

4. Am I Comparing Myself to Others Too Much?

Why This Question Matters:

Before his death, Charlie Munger, the long-time friend and colleague of Warren Buffet, was quoted as saying the world does not run on greed, but on envy. We something someone that someone else, like a spectacular return on a holding, and we just have to have something like it. Constantly comparing your returns to those of others can create unrealistic expectations and dissatisfaction. Every investor's situation is unique, with different goals, risk tolerances, and timelines. And most importantly you do not know the cost someone else paid, through volatility, sleepless nights, etc. before they had the return you now see. When you compare yourself to others, you may be tempted to deviate from your well-thought-out strategy in pursuit of someone else's perceived success. This can lead to poor decisions, like chasing hot stocks or sectors without proper research. Moreover, constant comparison can erode confidence in your approach, increasing stress and impulsiveness. It also distracts you from focusing on your personal financial goals, which should be your primary benchmark. By understanding that your journey is different from others, you can reduce anxiety, maintain a clear mind, and make more rational investment decisions. Recognizing and avoiding this trap will help you stay disciplined and aligned with your strategy.

Steps to Provide Answers:

Set Personal Benchmarks: Focus on your own goals and progress rather than external comparisons.
Limit Social Media Influence: Be cautious about relying on social media for investment advice or comparisons. Probably the biggest contributor to FOMO that we have.

5. Do I Equate Market Success with Personal Worth?

Why This Question Matters:

It’s easy to tie your identity or self-esteem to your investment performance. When market returns are strong, it may boost your confidence and sense of worth, but during downturns, it can lead to negative emotions like self-doubt, anxiety, and even despair. This emotional rollercoaster can impair judgment, causing impulsive decisions or reluctance to take necessary risks. Additionally, equating success with personal worth can create unhealthy pressure to achieve unrealistic returns, increasing stress. Recognizing that market performance is beyond your control helps you maintain emotional stability, focus on sound strategy, and make decisions based on logic rather than personal validation.

Steps to Provide Answers:

Separate Identity from Investing: Remind yourself that market outcomes are influenced by numerous factors beyond your control. It is impossible for you to anticipate the result of millions of interactions between investors in the markets or a stock.
Celebrate Process, Not Just Outcome: Focus on whether you followed your strategy, regardless of short-term results.

6. Am I Too Focused on Short-Term Results?

Why This Question Matters:

Focusing too much on short-term performance can distract you from long-term goals and lead to frequent changes in strategy. Short-term volatility is an inherent part of investing, and reacting to it can cause unnecessary stress and impulsive decisions. This behavior often results in higher transaction costs, missed long-term opportunities, and diminished returns. Moreover, an obsession with short-term results can prevent you from fully benefiting from compounding, which requires time and patience. By shifting your focus to long-term performance, you can maintain a more balanced approach, reduce anxiety, and stay aligned with your financial objectives.

Steps to Provide Answers:

Adopt a Long-Term Perspective: Regularly review your long-term goals to stay grounded.
Limit Portfolio Monitoring: Reduce the frequency of checking your portfolio to avoid overreacting to short-term fluctuations.

7. Am I Avoiding Decisions Due to Analysis Paralysis?

Why This Question Matters:

Spending too much time analyzing can prevent you from making timely investment decisions. Analysis paralysis occurs when you overthink every potential outcome, which can lead to missed opportunities and stagnation. In investing, waiting too long to act can result in buying assets at higher prices or missing optimal entry points. Furthermore, it can cause unnecessary stress and drain mental energy that could be better spent executing your plan. Recognizing when enough analysis has been done and having confidence in your research is key to maintaining momentum in your investment journey. Reality will never provide us with all the answers ahead of time.

Steps to Provide Answers:

Set Decision Deadlines: Give yourself a specific timeframe to make investment decisions.
Prioritize Key Factors: Focus on a few important factors instead of trying to analyze every detail.

8. Do I Have a Plan for Dealing with Success?

Why This Question Matters:

Bill Gates is credited with saying “Success is a lousy teacher”. Unexpected success can lead to overconfidence and risky behavior, such as increasing exposure to high-risk assets. Think about it for a second. If over the long term, the market goes up about 2/3rds, of the time, then the odds are good that over time, your new investment in a broad market index will go up at least for a while. If you equate success only with the outcome and nothing else, then how would you know any different? Without a clear plan for handling gains, investors may deviate from their original strategy and assume that recent success will continue indefinitely. This mindset can result in poor diversification, excessive risk-taking, or failure to realize profits when appropriate. Additionally, sudden success can distort your perception of risk and reward, making you more vulnerable to market downturns. Having a structured plan in place helps you maintain discipline, secure gains, and make sure that your portfolio remains aligned with your long-term financial goals.

Steps to Provide Answers:

Stick to Your Allocation: Even after significant gains, maintain your predetermined asset allocation.
Take Partial Profits: Consider taking partial profits to lock in gains without abandoning your strategy entirely.

9. Am I Being Realistic About Expected Returns?

Why This Question Matters:

Unrealistic return expectations can lead to frequent dissatisfaction and impulsive changes in strategy. If you expect double-digit returns every year, you may abandon sound strategies during periods of average or below-average performance. Overestimating potential gains can also cause you to take excessive risks, exposing your portfolio to significant losses. Conversely, underestimating returns may lead to overly conservative choices that don’t keep up with inflation. Having a realistic understanding of potential returns helps you set appropriate goals, stick with your plan during market fluctuations, and make balanced decisions that align with your risk tolerance and time horizon. This realistic mindset can reduce emotional decision-making and improve long-term consistency.

Steps to Provide Answers:

Study Historical Returns: Look at the long-term historical returns of different asset classes. For example, the S&P 500 has averaged around 7-10% annually over the long term, including dividends.
Adjust for Inflation: Understand the difference between nominal and real returns. Your real return is what matters for purchasing power.
Set Reasonable Benchmarks: Use appropriate benchmarks to measure your portfolio’s performance. Comparing your returns to an unrealistic or irrelevant benchmark will only lead to frustration.

Taking Control of Your Investment Journey

Investing is a journey, not a one-time decision. By asking yourself these critical questions—both rational and emotional—and taking actionable steps, you can uncover hidden blind spots and become a more successful DIY investor. Remember, consistency in investing comes from clarity, discipline, diversification, realistic expectations, and a commitment to lifelong learning.

Take time to reflect on your current approach and start making small changes today. Over time, these small adjustments can lead to significant improvements in your investment outcomes.

Remember, investing is personal. What worked for your neighbor or coworker does not mean it is right for you. Before making any changes, preparation and approaching it with realistic expectations is the key. After interviewing and consulting with thousands of investors over the last 25 years, we have found they all eventually fall into the same trap - their investments did not match their expectations, causing an emotional reaction when this occurs. We will present you with a fuller, more reliable expectation picture of your investments. This allows you to confidently navigate down whatever investing path you decide.

Spend a few minutes with us to see if we are a good fit for each other.