The Most Important Thing to Understand Before You Invest! Human Behaviour 

We often think investing is about the numbers: profit margins, balance sheets, dividend yields, and all that jazz. And yes, they’re important—but if you ask me, there’s something even more powerful that determines your success in the share market… human psychology. 

It’s Not About the Market, It’s About How People React to It 

Markets go up. Markets go down. That’s not the interesting part. What really matters is how people behave during those times. 

When markets are booming—when we’re seeing record highs—it’s like a sugar rush. People get greedy. They chase returns. They pile into shares they don’t understand because “everyone else is doing it.” 

And when the market corrects, or worse, crashes? That same crowd panics. They get scared. And often… they sell. 

We all know the theory: buy low, sell high. But in practice? Many people do the opposite. Why? Because we’re human. 

A Story That Says It All 

Just today, a client told me about someone they knew—let’s call him Steve. Steve had found what he thought was Queensland’s best financial advisor. He invested $2 million. 

Then COVID hit. The markets fell off a cliff. Steve’s $2 million dropped to $1.6 million. 

So, he did what many would do—he panicked. He pulled the money out, locked in the $400,000 loss, and walked away. 

In hindsight? Painful. The market rebounded faster than anyone expected. We saw 18 months of booming returns, especially in tech. Microsoft, Zoom, and plenty of other companies surged as the world shifted to working from home. 

So, What Should Steve Have Done? 

Well, the best option—if he had the cash—would’ve been to tip more in while markets were down. Buy when everyone else is fearful. 

The worst option? What he actually did—sell at the bottom and lock in the loss. 

But even if he couldn’t stomach investing more, there was a third option: just hold. Stay the course. Turn off the news. Stop checking the portfolio. And take a long-term view. 

Because here’s the thing. Steve’s also a business owner. He knows that building a great business doesn’t happen overnight—it takes years, even decades. That same logic applies to the businesses listed on the stock market. 

The Problem with Liquidity 

One of the best—and worst—features of share markets is liquidity. You can sell at the click of a button.  

That instant access means your portfolio is at the mercy of every emotional investor on the planet. Fear and greed can trigger massive market swings in days. 

But for the patient investor—for those who understand how humans behave—that’s the opportunity. 

My Advice to New Investors 

If you’re just getting started in the share market, don’t make your first priority learning how to read a balance sheet or calculate dividend payout ratios. 

Start by learning about investor psychology. 

Learn how people behave when markets are flying—and when they crash. 

Understand how emotions can override logic. 

And once you’ve got that part sorted, the rest will come easier. 

Because the truth is, investing success isn’t just about knowing numbers. It’s about knowing yourself—and everyone else, too. 

The information provided in this article is general in nature only and does not constitute personal financial advice.