The Real Risk Is Usually Not What You Think It Is
One of the great frustrations in investing is that people often spend a lot of time worrying about the wrong thing. Not because the concerns are irrational. Many of them are perfectly understandable. Wars matter, inflation matters, oil prices matter, elections matter, and markets react to all of it.
However, over time one of the clearest lessons in investing is that what causes the most damage is often not what is happening out there. It is what is happening here, between our ears. The way investors make decisions has a greater impact on outcomes than the massive, external occurrences in the real world.
Daniel Crosby, behavioral finance expert, has spent years studying the way investors make decisions, and one of the most powerful forces he points to is confirmation bias. If there is a part of you that wants to believe something negative, you will find data to support that belief. If there’s a part of you that believes markets are about to collapse, there is no shortage of people willing to tell you exactly that. In a strange way, that can feel comforting because it gives emotion a sense of justification. That justification often pushes people toward mistakes because once emotion takes over, process tends to disappear.
Preferences for positive outcomes work the same way. If you want to believe there is an easy way to get rich, you will find endless stories that back you up. There is always some new investment idea, some online expert, some strategy that appears to offer a shortcut. Private credit is a good example right now. It is being presented in many places as an attractive alternative to traditional fixed income. Why accept 3 or 4 percent on a ten-year treasury note when someone is offering eight, nine, or ten percent?
Rationally, we know that these two options are not the same. There is always a reason why ten percent is being offered over 3 or 4. An investor is being compensated for the amount of risk they take. Risk does not disappear simply because the device is being touted by a celebrity. Yet, people often convince themselves that they can somehow identify the exceptions, that they can pick the right deal, the right project, or the right opportunity. That is confirmation bias again. We find reasons to support what we want to believe, particularly when the promise of higher returns appears to solve another problem we may be having currently.
Over the years, we have watched good people lose money in all kinds of ways. A private deal that looked solid until it was not. A real estate project that didn’t end up performing the way it was sold. Crypto that looked brilliant during the rise and disappointing once the dust settled. There is always some version of easy money being marketed, and there is always someone online explaining how they cracked the code. When you actually listen carefully, you may find that what is being described simply does not work. Occasionally it is not even legal. Yet people listen because everyone wants to believe there is a faster path. There really is not. The closest thing to a reliable formula for wealth remains remarkably boring: spend less than you make, save consistently, and invest patiently. Boring, but proven to be true.
It is one thing to want strong returns – that is fair. It is another thing to need them because spending has outrun resources. That is where trouble begins. If spending consistently exceeds what resources can sustain, eventually the math wins. No tax strategy fixes that. No clever investment product fixes that. No online shortcut fixes that. Planning can improve outcomes, tax decisions matter, and there are opportunities to be smarter, but most of those are incremental rather than transformational. The biggest determinant in your own financial success is your own behavior.
That same principle applies when headlines become overwhelming, which is exactly what investors dealt with through the first quarter of 2026. The year began reasonably well, then quickly shifted as geopolitical tensions intensified in the Middle East. Oil prices rose sharply, markets reacted, and headlines became darker by the day. Then, almost overnight, markets shifted again when a ceasefire emerged and oil prices dropped rapidly. That matters because oil often tells you a great deal about how markets are digesting geopolitical stress. Historically, one of the strongest foundations for a market upturn during geopolitical conflict has been a swift decline in oil prices. We saw it in 1990 during Iraq and Kuwait. Oil surged, markets fell, then oil reversed sharply and equities stabilized.
In the first quarter of 2026, crude rose dramatically, equities corrected, oil then pulled back quickly, and markets responded almost immediately. That does not mean risk is gone. It means markets are processing probabilities faster than headlines often suggest, which is why reacting emotionally to every development rarely improves long-term outcomes.
If markets had truly priced a severe collapse, we would have seen much deeper equity weakness and significantly lower bond yields. Instead, bond yields remain relatively elevated, which matters because bond markets often reveal whether investors truly expect a deep recession.
Even earnings estimates offer an interesting signal. Through the first quarter, estimates for parts of the S&P 500 were actually revised upward, particularly in technology, energy, and financials. That is not what markets usually look like when collapse is imminent. It does suggest that a great deal of negativity may already be reflected in prices, which helps explain why markets can rebound sharply, as they have in this first part of Q2, even while the headlines still feel uncomfortable.
There is always something available to worry about, and if we let bias lead, there is no end to what can dominate our thinking. Your better question is always the same: what does the data actually say?
As we move towards the midway point in a year that has already seen volatile and changing markets, it is important to remain focused on data, opportunities in unexpected places, and our own behaviors.
What is driving your investing mindset today?
