Guest opinion: The psychology of investing: How a sound investment process helps beat the toughest market by Pieter Cloete, Senior Investment Manager
Markets have a habit of feeling most uncomfortable just when investors are paying the most attention. Headlines move quickly, opinions multiply, and short‑term price movements can take on outsized importance. In such environments, the challenge for investors is not a lack of information, but knowing how to interpret it—and how to respond without losing sight of long‑term objectives.
What is happening in markets?
At the time of writing (16th April 2026), geopolitical developments in the Middle East continue to dominate headlines. While a ceasefire involving Iran remains in place, the situation is fragile, and disruption around key energy routes has kept investor focus firmly on oil prices, inflation expectations and broader economic implications.
Despite this backdrop, markets have shown resilience. Oil prices have eased from recent highs, bond yields have retraced, and global equity markets have continued to make progress. This mixed response highlights an important feature of markets: they are constantly balancing risk, expectation and adaptation, often more quickly than sentiment might suggest.
Scenario analysis can help frame what lies ahead without resorting to prediction. Research from Capital Economics outlines a range of possible outcomes depending on how long tensions persist and the extent of damage to energy infrastructure. In their baseline scenario, oil prices moderate, inflation remains contained, interest rates stay broadly unchanged, and global growth slows only modestly. Even in more adverse outcomes, the analysis suggests conditions that, while challenging, remain within the range markets have historically been able to absorb.
In plain terms, this environment is better viewed as a potential bump in the road rather than a fundamental derailment.
The psychology of investing
This is where behavioural finance comes into sharp focus. The toughest market most investors face is not equities, bonds or currencies, but the one in their own heads. Periods of intense news flow naturally create a desire to act – to reduce exposure, change strategy or wait for greater clarity.
Behavioural finance shows how easily emotions can influence decisions. Short‑term movements can feel more significant than they truly are, recent events can appear more permanent than history suggests, and doing something can feel safer than doing nothing. These instincts are human, but if left unchecked they can undermine long‑term plans.
The role of a sound investment process
A robust investment process exists precisely to counter these behavioural challenges. Rather than attempting to forecast events or time markets, disciplined approaches focus on diversification, risk management and long‑term objectives. Portfolios are constructed with the expectation that markets will move through different phases.
Investment managers are responsible for implementing this process, managing asset allocation and ensuring portfolios remain aligned with their intended risk profile as conditions evolve. Financial advisers, in turn, ensure strategies remain appropriate for each client’s circumstances, objectives and time horizons, while also providing perspective when emotions may heighten. The collaboration between advisers and investment managers provides both structure and reassurance.
Bringing it all together
By combining market awareness with behavioural insight and a disciplined investment process, investors are better positioned to look through short‑term noise and remain focused on long‑term outcomes. Markets will always change; human behaviour rarely does. A sound process, supported by strong advice, helps ensure decisions remain grounded when it matters most.
Learn more
FIM Capital Limited was established in 2006. The Company, which is completely independent, employs over 45 people and has approximately £2.8bn of assets under management and administration.
The Company provides services under two broad and overlapping headings:
- Investment Management services – focussed on managing discretionary portfolios for private clients, institutions, trusts and corporations.
- Administration services – focussed on the provision of administration and accountancy services to a wide variety of both closed ended and open-ended collective investment schemes.
Further details may be found at www.fimcapital.co.im
Warnings
The views, thoughts and opinions expressed within this article are those of the author, and not those of FIM Capital.
No news or research item should be construed as a recommendation to trade. The inclusion of securities within this report does not necessarily imply their suitability for individual portfolios or situations in respect of which further advice should be sought. Information contained in this piece has been compiled from sources believed to be reliable but is not warranted to be accurate or complete.
Any reference to past performance is not necessarily a guide to the future. The value of investments may go down as well as up and may be adversely affected by currency fluctuations.
FIM Capital Limited, 55 Athol Street, Douglas, Isle of Man, IM1 1LA, is licensed by the Isle of Man Financial Services Authority. Company registered in the Isle of Man No: 012651V
