How emotions and expectations shape investing and what economics teaches us about staying the course

When it comes to investing, it’s not just about numbers—it’s about mindset. Emotions, expectations and historical context all play powerful roles in how we make financial decisions. Understanding this can potentially lead to better outcomes and a more confident, consistent approach to building wealth.

Here’s what every investor should keep in mind.

What you’ll learn:

• The role of emotion: Why fear can be costly
• Investor expectations: What’s your mindset?
• Asset allocation: Balance can be the best bet
• Don’t fear volatility
• Final thought: Control what you can

The role of emotion: Why fear can be costly

It’s easy to think of investing as purely rational. But the truth? Our emotions often get in the way. Fear and media headlines can trigger panic selling, while overconfidence during market highs can lead to risky bets.

“History shows that markets have been resilient even in the face of wars, recessions, and crises. Over time, diversified portfolios have rewarded patient investors with substantial growth. It’s not about predicting the next move, but about being prepared and staying the course,” says Nick Hamilton, of Alliant Retirement and Investment Services.

One of the biggest emotional pitfalls is loss aversion, which is the tendency to fear losses more than we value gains. This can lead to playing it too safe, jumping in and out of the market at the wrong times or missing out on long-term growth potential.

The takeaway: The best strategy isn’t to time the market, it’s to spend time in it. Staying invested, even through dips, has historically paid off.

Investor expectations: What’s your mindset?

Investors generally fall into one of three mindsets:

• The Optimist: Expects endless growth, may take on too much risk.
• The Skeptic: Doubts the market, leans heavily on bonds and can miss out on potential.
• The Pessimist: Avoids risk altogether, sticking with cash or CDs—but may lose ground to inflation.

Each mindset carries risks. Without realistic expectations rooted in economic history, it’s too easy to build a portfolio that doesn’t align with your goals or risk tolerance.

The Economic truth: Markets have historically recovered

A historical review of market performance, from the Great Depression to modern-day crises, shows one consistent pattern: resilience.

Yes, markets fluctuate. But over the long run, the trend has been upward. Stocks have historically outperformed other assets like bonds or cash, although they are more volatile. Bonds and cash may feel safer in the short term, but they often struggle to keep up with inflation.

Asset allocation: Balance is the best bet

Diversifying your investments across stocks, bonds and cash can help manage risk while capturing growth potential. Even conservative investors have seen meaningful long-term gains when staying the course.

Don’t fear volatility

Every year brings ups and downs. Most years see a significant dip at some point. But dips don’t necessarily mean doom.

Final thought: Control what you can

You can’t control the markets, but you can control how you respond to them.

• Keep emotions in check.
• Set realistic expectations.
• Use history to guide, not scare, you.
• Diversify.
• And most of all, stay invested.

The data shows: the market has historically recovered.

Please note: This content should not be considered tax, legal or investment advice or an investment recommendation. Consult your financial professional for personalized advice that is tailored to your specific goals, individual situation, and risk tolerance. All investments involve risks, including possible loss of principal.

Asset allocation does not ensure a profit or protect against a loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

All indices are unmanaged and cannot be invested into directly.  Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.  Past performance is no guarantee of future results. CDs are FDIC insured to specific limits and offer a fixed rate of return if held to maturity. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise, and bonds are subject to availability and change in price.

Financial professionals are registered reps with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Alliant Credit Union (ACU) and Alliant Retirement and Investment Services (ARIS) are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using ARIS, and may also be employees of ACU. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, ACU or ARIS. Securities and insurance offered through LPL or its affiliates are: