Regular readers will already know I believe mindset underpins absolutely everything. Your results in property, in business, in life: they’re all a direct result of how you think.
But when it comes to investment, you can have a positive, growth mindset and still make some deeply irrational decisions. Poor investment decisions aren’t only made by reckless amateurs; they’re made by rational people who don’t realise that their thinking is being distorted.
So how do you avoid that?
Experience, and wisdom that comes from making and learning from mistakes, will help, but you should also understand cognitive bias, or how your brain might be working against you.
I’ve spoken about this many times before, but it’s worthwhile revisiting. Fully understanding the thinking traps that you might unwittingly fall into is something that can help your investing approach move from amateur to professional.
Your brain is not objective
Cognitive bias is, put in basic terms, a mental shortcut. Your brain is constantly filtering information, so to make life easier and conserve energy, it looks for patterns, relying on past experience, things it has done before, or for things that seem logical, or familiar.
Useful for survival maybe, but not so much when it comes to investing. And in 2026, our biases aren’t necessarily just internal anymore: they’re being reinforced externally. Algorithms, social media feeds, AI tools don’t challenge your thinking, they feed you more of what you already believe, which makes self-awareness more important than ever.
So what should you be watching out for?
Confirmation bias in the AI world
Confirmation bias, or the tendency to look for information that supports what you’ve already decided, has always been dangerous. But today, you don’t even have to go looking for it.
If you believe property in a certain area is the next big thing, your social feeds will show you articles and videos supporting it, and AI search results may prioritise popular narratives over uncomfortable ones.
They might reassure your certainty, but remember, ‘certain’ isn’t the same as ‘correct’.
The question shouldn’t be whether you can find evidence that something will work, it should be finding out what could prove you wrong. Look for evidence, not reassurance.
Will the good times keep rolling?
We’ve just lived through one of the sharpest interest rate cycles in decades – ultra-low rates followed by rapid rises. Now there’s speculation about what comes next. Will rates stay high? Are cuts inevitable? Is this the new normal?
That’s recency bias, where you project the recent past into the indefinite future. But markets just don’t work like that: sentiment shifts, cycles turn, and unexpected events happen. If your investment only works because of the current environment, it’s not so much investment as gambling. You should always stress test your deals on a variety of scenarios.
A sharply-dressed dud?
I see this happen a lot: people assigning more weight to information depending on who delivers it, otherwise known as authority bias.
It could be a well-dressed ‘expert’ or a charismatic developer on stage; because they look the part your brain might assume they’re right about everything. But remember: presentation isn’t proof. Now more than ever, authority can be manufactured: social proof can be bought and confidence can be rehearsed, recorded and edited to perfection.
So how should you respond to bold claims? It’s not instant belief or dismissal, it’s due diligence. Do your own homework and never, ever abdicate your decision making to another person, no matter who they are or how they’re dressed.
Success stories for the win?
Who doesn’t love a success story? Survivorship bias is the tendency to listen to the insights and opinions of survivors or successful people.
Bookstores are full of biographies on Steve Jobs, Richard Branson, Mark Zuckerberg, Jeff Bezos… the list goes on. Name the business icon and there’s a book about them, because they’re successful and want to share the story of how they did it.
I mean, have you ever gone out and bought a book by someone who suffered a devastating loss, who went out and tried to start a business, the whole thing collapsed and they lost their home?
Most people aren’t interested in reading about the losses or the mistakes. But the reality is that if you go and read the story of somebody who tried very hard and lost it all, you’ll find more valuable insights.
If you only study the winners, you distort your understanding of risk. The real lessons often come from what went wrong: the deals that stalled, the funding that fell through, or the market shifts that meant someone lost everything.
Hanging on to an albatross
Disposition bias is one I see a lot in the property sector.
Investors are quick to sell the asset that has performed well, locking in a gain, but holding onto the underperformer, hoping that if you wait long enough, it’ll bounce back and you won’t make a loss.
That decision is almost always driven by emotion, rather than logic. Cutting your losses might feel like admitting you were wrong about something.
Say you buy two properties and you pay 100k for both. A year later, one has fallen in value and is now valued at 75k and the other has risen by 50%.
You’re up 50k on one, you’re down 25k on the other, and you have to sell one. Which do you choose? The vast majority of people will turn around and say they’ll sell the 150k and take the profit. That might sound logical enough, but the reality is that most people just don’t want to crystallise the 25k loss.
What you should do is look at the assets and try to figure out what’s driven the price rise and fall in both cases. Most people will sell the winner just because it’s gone up, not because of the underlying reason why it rose. But who’s to say that a year later it wouldn’t reach 250k or 300k, whilst the property that’s languishing at 75k might stay there? Sometimes you buy something and it does badly and that has to be accepted as a risk as an investor.
The best thing you can do is accept the loss, sell that 75k, get the money back and put it into something better.
So, how rational are you?
If you’re being truly objective, the answer is probably quite an uncomfortable one to think about. But the thing about cognitive biases is that once you’re aware of them, you can work to mitigate them.
The difference between an amateur and a professional investor is the willingness to question your own thinking, actively look for blind spots and to test your assumptions. Think about something (a deal, a decision) that didn’t go as well as you thought it would. Now think about the steps that led you there: what was influencing you?
Mindset matters, but only if you’re willing to interrogate it. The investors who do that consistently are the ones who get better. The ones who don’t keep making the same mistakes and wondering why.