Investor behaviour

Today’s stockmarkets are volatile; however, the bigger risk could be human psychology.

During the COVID pandemic, I noticed massive inflows into global stockmarkets in this volatile period. Online brokers saw record numbers of people opening new trading accounts. Many retail investors lose money, and so in 2021 I decided to write an article on stockmarket psychology.

Two current issues (July 2026) led me to reflect on that article: the huge bet on AI (Artificial Intelligence) and people buying gold.

1. The major tech companies are investing heavily in AI, and retail investors are pouring unprecedented amounts of new money into technology funds (at the same time reallocating money from traditional equity funds). There are obvious similarities with the dotcom bubble of 2000, and the concentration risk is extremely real.
   
   Many companies adopting AI have not seen any measurable return (95% of companies according to a recent MIT study!).
   
2. Earlier this year, I saw people queuing around the block to open bullion accounts at the Perth Mint. People that had never bought gold or silver before. These scenes were repeated around the world.
   
   Unfortunately, private investors often buy when values are high and sell when they are low. This is not a great strategy to make money.

What made people queue to buy gold at the highest price it has ever been? (It’s now down about 30% – this year gold has been a great way to turn large savings into smaller ones). And what explains the massive inflows of investments into the tech giants that are developing AI (or the hype around the SpaceX IPO)?

The article I wrote a few years ago about stockmarket psychology is just as relevant today. Investors (people) do not always behave rationally. With so much enthusiasm this year around AI and gold, the same psychological patterns are visible. For example:

• Confirmation bias: seeking evidence that supports our investment (or our belief in the application of AI) while ignoring warnings.
• Recency bias: basing decisions on recent market movements, failing to learn from history.
• Herd behaviour: “everyone else is investing /adopting AI /buying gold, so I should too”.
• FOMO: “if I don’t buy AI stocks or gold now, I’ll miss this opportunity”.
• Overconfidence: believing that we can identify the winners (or time the market) better than everyone else.

Some of the technology may be new, but the human beings investing in it are not.

Are you investing because you have done your own research, or because everyone else seems to believe the story? The same question applies if you are thinking of adopting AI in your company.

The previous article contains practical tips for investors to mitigate these psychological traps. These are not new behavioural patterns, and they apply to much more than just investing behaviours; they can also affect safety-critical decisions in the workplace (from the Board to the frontline).

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