Why it pays to be a rational thinker with investing

Money isn’t everything, but it seems to count for a lot.

This weekend, money made me opt for sea bream over salmon for dinner (thanks, yellow sticker), to book my holiday in October, and to spend an extra hour in the station to get the super off-peak train. We work hard for our money in so many ways.

So, it makes sense to me when people’s first reaction to investing is ‘I don’t want to lose my money’. Me neither. Unfortunately, without investing, it can be difficult to create a comfortable future for life events like retirement or buying a home. Investing can be as much an emotional decision as a logic-based choice. To help yourself towards the best future, there often needs to be a balance between the two.

But how do we find the middle ground between what statistics say is the best way to increase wealth, and feeling at ease with the process?

One of the best ways to quell the fears of investing is through education. We tend to focus on the losses of our money far more than the gains: the feeling of pain after losing £100 is twice as powerful as the feeling of joy when gaining £100, according to research from BlackRock.

Events like the 2008 financial crisis create long lasting investment fear. But how long did the MSCI World, an index that tracks companies across the globe, take to recover from this downfall?

In 2007, the MSCI World peaked at a value of around £1,845 before dropping below £1,230 during the Great Financial Crisis. But by 2010, the market recovered those losses and hit new highs. As of 8 August 2025, the MSCI World is valued at £9,799. Of course, past market performance doesn’t guarantee what will happen in the future.

And even when you can see how things have worked out in the past, there might be some investment options that you just don't feel comfortable with.

Homes are a popular area where this is the case. Some people would rather buy their home outright rather than take out a mortgage, if they can afford it. Numbers-wise, this often doesn’t add up as the ‘right’ decision.

Let’s say you purchased a house in 2000. The average price this year was £194,258 with an average fixed-term mortgage rate of 6.65%. If you were able to buy the house outright, you would pay the £194,258 plus fees.

Or you could decide to make a deposit of 20% and have a mortgage. To pay off the mortgage over 25 years, it would cost you £319,178. But, if you invested that other 80% you would have used to buy the house in full at the same time 25 years ago, that £155,406 would have turned into £501,122, not factoring in fees. So even though the house costs more with a mortgage, having the money in the market instead would have left you richer.

Numbers-wise, it seems like a no-brainer. But to some people, the comfort of just owning their home outright is more important.

Morgan Housel, a long-time financial writer for the Wall Street Journal and author of personal finance book the Psychology of Money, is one of the people that takes this approach.

This isn’t necessarily a case of the ‘right’ or ‘wrong’ decision. It’s just finding what works for you. And investing in a way that feels safe to you could prove to be helpful in the long run. It may allow you to be more comfortable in your investment decision through market dips, and this could be extremely important in profiting off the market.

For example, if you decided to put £1,000 into a FTSE 100 tracker fund at the beginning of 2025, but were nervous about your decision, you may have withdrawn your money when the market fell in early April. If you took your money out on 4 April and were then too nervous to put money back in the market, you would have ended up with about the same amount of money you started with.

However, if you were feeling comfortable in your FTSE 100 investment strategy at the beginning of the year and kept your money in the market even when it fell in April, you would have turned your £1,000 into £1,140 by 11 August. All the calculations in these examples exclude charges.

This may feel like a small difference, but if this happened each time there was a market wobble, the money would add up quickly. If you invest in something within your comfort-zone right off the bat, you may be able to avoid some panic and create gains along the way.