Combating Negative Influences

Picture a school sports day and a long jump pit. In the morning, calm and unhurried, you pace out your run-up, plant your foot on the line, and jump a perfectly good distance. You know how far you can jump. But now imagine that just as you're about to leap, a hundred kids are screaming "GO FURTHER! FURTHER!", and next to you a boy has just landed a huge jump, and a little voice inside you shouts, "Don't be the one who jumps short!" So you sprint too fast, take off from the wrong spot, fly through the air feeling like a champion - and land flat on your face, well past the line, foul jump, zero.

That little voice - the one that makes you throw away your careful plan the moment the crowd gets loud - is the subject of this whole chapter. In investing it doesn't scream about long jumps. It whispers two things. When prices are rising and everyone is happy, it whispers "Hurry, buy, before you miss it!" And when prices are falling and everyone is scared, it whispers "Get out, sell, before it all disappears!" Both whispers feel like wisdom in the moment. Both are almost always wrong.

Here is the strange, sad truth this chapter is built on. Most people do not lose money because they are stupid or because they picked a bad company. They lose money because they let those two voices - call them greed and fear - take the steering wheel at exactly the wrong moments. Greed makes them buy when things are dear and everyone is excited. Fear makes them sell when things are cheap and everyone is frightened. They end up doing the precise opposite of the simple rule buy low, sell high. They buy high and sell low, over and over, and then wonder why the market seems to be against them.

The good news is that these voices can be tamed. Not by being braver in the moment - in the moment you are far too swept up to be brave - but by making a few quiet promises to yourself beforehand, when your head is clear, and then refusing to break them when the noise starts. That is the whole art of combating negative influences: deciding calmly today what you will do when the storm comes, so that the storm never gets to decide for you.

You might think that being a good investor is mostly about being clever - reading reports, doing sums, spotting the great company nobody noticed. All of that helps. But there is something that sits above all of it, and if you get this one thing wrong, no amount of cleverness saves you.

Here is why. Imagine two people. The first, Rohan, is brilliant at picking companies. He genuinely finds wonderful businesses. But every time the market runs up and his friends are boasting about their gains, he gets excited and pours in more money at high prices. And every time the market crashes and the news is full of doom, he panics and sells everything near the bottom. The second, Arjun, is only average at picking companies. But Arjun made himself a set of dull rules years ago and simply follows them, no matter what the crowd is doing.

Over ten years, Arjun ends up far ahead of Rohan. Not because Arjun is smarter - he isn't - but because Rohan keeps sabotaging his own good picks by buying them expensive and abandoning them cheap. Rohan's emotions undo his intelligence. This is the thing almost nobody believes until they've lived it: how you behave when everyone around you is losing their heads matters more than how clever you were when everyone was calm.

And it matters more in real life than in a story, because these two voices are not gentle suggestions. They are among the strongest feelings a human being can have about money. The fear of losing your savings feels like the fear of falling. The fear of missing out while your neighbour gets rich feels like being left out of a party everyone else is at. These are ancient, powerful pulls, and they arrive dressed up as good sense. Greed never says "be greedy" - it says "this is a once-in-a-lifetime opportunity, be smart." Fear never says "panic" - it says "protect your family, be responsible." That disguise is what makes them so dangerous. You don't feel like you're being swept away. You feel like you're finally seeing clearly. That's the trap.

So learning to combat these influences isn't a nice extra skill for advanced investors. It's the foundation the whole house stands on. Get it wrong and the cleverest strategy in the world collapses. Get it right and even a plain, ordinary strategy quietly does well, year after year.

To fight these voices, it helps to see clearly how they work on a crowd. So let's build a simple picture of what actually happens to the mood of the market - and to your own feelings inside it.

Think of a pendulum, the kind that swings back and forth on a big old clock. In the sensible middle, it hangs straight down. That middle is where prices roughly match what things are really worth - not too cheap, not too dear. But the market almost never sits still in that middle. It swings. When times are good, it swings far to one side, into greed: prices climb higher than things are truly worth, and everyone feels wonderful and wants more. When times are bad, it swings far to the other side, into fear: prices sink lower than things are truly worth, and everyone feels awful and wants out. And crucially, the crowd feels most greedy exactly when the pendulum is furthest into the expensive side, and most frightened exactly when it's furthest into the cheap side. The emotion is loudest at the worst possible moment to obey it.

Now here's the part that turns this picture into a weapon you can use. The pendulum's swings are what create the two mistakes. As it swings into greed, prices rise, and rising prices feel like proof that buying is smart - so the greed feeds on itself and pushes prices even higher. As it swings into fear, prices fall, and falling prices feel like proof that selling is smart - so the fear feeds on itself and pushes prices even lower. The crowd's emotion and the price push each other in a loop. That loop is exactly why prices overshoot so far in both directions, and why the loudest feeling is always the one most likely to hurt you.

Once you can see the pendulum, you can do something the crowd cannot: you can notice where the pendulum is instead of just how you feel. When everyone around you is euphoric and prices have run up for two years, that isn't a signal to join - it's a signal that the pendulum has swung far into greed, and the sensible middle is now below you. When everyone is terrified and prices have collapsed, that isn't a signal to flee - it's a signal that the pendulum has swung far into fear, and the sensible middle is now above you. The feeling and the truth point in opposite directions. Learning to trust the pendulum over the feeling is the beginning of everything.

Let's put real rupees down and watch greed do its work, step by step. illustrative

Meet Aayra. She is sensible with money. For three years she has quietly put ₹10,000 a month into a simple index SIP, buying a little every month whether the market is up or down. By doing nothing clever at all, she has built up ₹5,00,000, and it has grown nicely because she just kept buying steadily.

Then comes a wild year. The market runs up and up. Every evening the news celebrates new record highs on the Sensex. Aayra's cousin doubled his money in a fast-moving stock and won't stop talking about it at family dinners. Her office group chat is full of screenshots of gains. A little voice starts up: "You're being too slow. Everyone is getting rich and you're plodding along with ₹10,000 a month like a grandmother. Put in more, now, before it's too late."

So Aayra breaks her own quiet plan. She takes ₹4,00,000 she had been keeping safe for a house deposit and dumps it all into the market in one go, near the top, into the hottest, most talked-about stocks - the ones that had already tripled. It feels fantastic. For a few weeks it even rises a little more, and she feels clever and bold and glad she didn't stay a grandmother.

Then the pendulum swings back. The exciting stocks, which had run far past what the businesses were actually worth, fall hard - down 45%. Her ₹4,00,000 lump becomes about ₹2,20,000. She has lost ₹1,80,000 of her house money, not because she picked a fraud, but because she bought at the top, in a hurry, because the crowd was loud. Notice what actually happened: the crowd's excitement and the rising price convinced her they were evidence, when really they were just the pendulum at its furthest, most dangerous point. When a confident, cheerful crowd is all doing the same thing, the pull to abandon your own plan and join them is enormous - and it grows strongest at exactly the moment the crowd is most wrong.

Here's the quiet tragedy in it. Aayra's original boring plan - ₹10,000 a month, rain or shine - was excellent. It would have kept buying calmly right through the madness and out the other side. The plan didn't fail her. She failed the plan, in one loud moment, because a voice told her that steady was for grandmothers and bold was for winners.

Greed is only half the story. Now let's watch its twin, fear, do the opposite damage - because the very same person who buys at the top will often turn around and sell at the bottom. illustrative

Stay with Aayra a moment longer. After her painful lump-sum lesson, she calms down and goes back to her steady ₹10,000-a-month SIP. Good. A year passes peacefully. Then a genuinely bad patch arrives - the kind that comes every few years. Some trouble in the wider world spooks everyone, and the market falls, and falls, and keeps falling, until it's down about 35% from its high. The news is relentless: crash, panic, "worst in years," experts on television warning it could halve again.

Aayra opens her account and sees her total savings - which had grown to ₹7,00,000 - now showing ₹4,60,000. On paper she has "lost" ₹2,40,000. Her stomach drops. The fear voice, which had been so cheerful last year, now turns cold and urgent: "Get out. Save what's left. This is going to zero. Everyone sensible is selling. Don't be the fool who rides it all the way down." And all around her, people are selling - her cousin has sold everything, the group chat has gone from gloating to grim, respected voices are saying cash is the only safe place.

So she does it. She sells the whole ₹4,60,000 and moves to the safety of cash, and feels a wave of relief. For a few weeks the market wobbles lower and she congratulates herself. Then, as it always eventually does, the pendulum swings back from fear toward the middle. Over the next year the market recovers most of the fall. The ₹4,60,000 she sold would have grown back to around ₹6,50,000 if she'd simply held. Instead she is sitting in cash, having turned a temporary paper dip into a permanent, real loss by selling at the worst moment - and now too frightened and sheepish to buy back in as prices rise.

Look carefully at the shape of what happened. She sold because everyone was selling and the price was falling - she took the falling price and the frightened crowd as proof of danger, when they were really just the pendulum at its lowest, safest-to-buy point. That is the fear voice doing to the downside exactly what the greed voice did to the upside: making the crowd's feeling feel like evidence. In both cases Aayra didn't lose to a bad company. She lost to a good plan abandoned at a loud moment.

Now for the deeper cut, the thing that makes these voices even harder to resist than they should be. When you feel that overwhelming pressure - everyone is buying, everyone is selling - you naturally assume you're looking at thousands of separate, thoughtful people who have each independently decided the same thing. And if thousands of independent people all agree, surely they can't all be wrong?

But that's the illusion. Most of the time, the "crowd" is not thousands of independent minds. It's one story being repeated through thousands of mouths. During Aayra's euphoria, her cousin, her group chat, the news anchor, and the stranger on YouTube were not four independent experts who each did their own careful homework and happened to agree. They were four echoes of the same exciting story - "this market only goes up, get in now." The confidence was multiplied and amplified, but the actual evidence behind it hadn't grown at all. It just got louder. A gripping story spreads from person to person like a catching cold, and as it spreads it lifts prices far beyond what the plain facts justify - so a loud, unanimous crowd is often just one thin idea wearing a thousand faces.

There's a famous experiment that shows how strong this pull is even when the truth is obvious. A researcher sat one ordinary person in a room with several others who were secretly actors. Everyone was shown two lines and asked which was longer - an easy question a small child could answer correctly. But the actors, one after another, confidently gave the wrong answer on purpose. Astonishingly, a large share of the real people, faced with a united and confident group, abandoned the evidence of their own eyes and went along with the obviously wrong answer, at least some of the time. They could see the truth. They caved anyway, because standing alone against a confident crowd is genuinely uncomfortable.

Now put yourself back in Aayra's shoes. If people will deny what their own eyes plainly show them just to avoid disagreeing with a confident group about a line, how much harder is it to hold your own view about something as murky and frightening as money, where nobody can be sure who's right? That is why the crowd feels so overpowering. It isn't that the crowd has better facts. It's that being the only one not buying, or the only one not selling, feels almost unbearable. And once you understand that the pressure comes from discomfort, not from evidence, you can start to answer it correctly: not by arguing with the facts, but by reminding yourself that a loud, unanimous crowd is exactly what you'd expect to see whether it's right or wrong - so its loudness tells you nothing at all about the truth.

So how do you actually do this? How do you hold your ground when both the greed voice and the fear voice, backed by a roaring crowd, are pushing you off your plan? The answer is beautifully simple, and it isn't "be braver in the moment." In the moment you cannot be brave - you're too swept up. The answer is to make your important decisions before the moment arrives, when your head is calm, and then treat those decisions as promises you're not allowed to break.

Two promises do most of the work. The first is a rule for what you'll do, written down in advance. The second is a number for what things are worth, worked out in advance. Let's watch both rescue someone. illustrative

Meet Aarvi. Having heard about poor Aayra, she does something different. On a calm ordinary Sunday, with no crisis anywhere, she writes two things in a notebook. Rule one: "I invest ₹15,000 on the 5th of every month into my index SIP. I do not add extra when the market is exciting. I do not stop when the market is frightening. I do not sell during a fall. This rule does not change because of news." And a value note: "An honest, fair price for what I own is somewhere around this level. If prices ever fall far below that, that's a chance to buy a little more, not a reason to run."

Now the storms come, the same two that broke Aayra. First the euphoria: the market soars, her cousins boast, the group chat glows. The greed voice whispers "add your house money, hurry." But Aarvi doesn't have to win an argument with the voice in that heated moment - she already settled it on that calm Sunday. Her rule says no extra during excitement. She simply keeps to her ₹15,000 and lets the madness pass. Then the fear: the market crashes 35%, her savings show a big paper dip, the crowd sells, the voice screams "get out." But her value note reminds her that prices are now below fair worth, which makes this a sale, not a disaster - and her rule forbids selling during a fall. So she keeps calmly buying her ₹15,000, which now buys more units because prices are low. When the pendulum swings back, those cheap units she bought during the panic are the ones that grow the most. Aarvi ends up far ahead of Aayra - not because she was smarter or braver in the moment, but because she'd already tied her own hands before the moment came.

This is the deep secret of combating these influences. You cannot out-argue a powerful feeling while you're inside it. But you can make a decision outside it, in calm, and then bind yourself to that decision so tightly that the feeling never gets a vote. The written rule and the value number are the ropes that tie you to the mast so the sirens' song can't steer you onto the rocks. Treat the market's daily mood as a servant, not a master - it will offer you giddy prices in good times and panicked prices in bad, and you are always free to ignore its offer and act on your own calm estimate of worth instead.

The slip is almost never "I decided to gamble." Nobody thinks that. The slip is subtler and more human: it's the moment you tell yourself "this time is different, so my rule doesn't apply."

Here's how it sneaks in. You made a calm plan. Then the crowd gets loud, and the greed or fear voice arrives - but it's too clever to simply say "break your rule." Instead it whispers a reason. "Yes, normally you'd hold, but this crash is genuinely different, the whole system is breaking." Or, "Yes, normally you wouldn't chase, but this boom is a real new era, the old rules don't apply." Every big swing of the pendulum comes wrapped in a story about why this one is special and your discipline should be suspended just this once. And because the story is everywhere - every mouth repeating it - it feels not like a temptation but like sober common sense. That's the exact moment your calm plan dies: not when you decide to be reckless, but when you decide you've found a good reason to make an exception.

Now the honest part, because even a good idea can be pushed until it turns silly.

The first way this misleads: "ignore the crowd" does not mean "the crowd is always wrong, so do the opposite of whatever it does." That's just being ruled by the crowd in reverse - you're still letting it decide, only backwards. Sometimes the crowd is buying because things are genuinely good, and sometimes it's selling because things are genuinely bad. The lesson isn't always disagree. It's don't let the crowd's feeling substitute for your own calm judgement of worth. If, after your own careful, unhurried look, you happen to agree with the crowd - fine. The point was never to be contrary. It was to make sure your conclusion is yours, reached in calm, and not just the loudest feeling in the room borrowed and worn as your own.

The second way it misleads: a rule set in calm is a wonderful shield, but a rule can also be wrong, and refusing to ever revisit it is its own kind of trap. Aarvi's rule to keep buying through falls works because she's buying a broad, sensible index that has no single point of failure - if she were instead stubbornly buying more and more of one troubled company as it collapsed, "never sell during a fall" would be turning a discipline into a disaster. The skill is to change your rules only in calm, for real reasons about the underlying worth of what you own - never in a storm, because a voice gave you an exciting excuse. Change your mind slowly, in daylight; never at midnight while the crowd is screaming.

And the third, quietest caution: taming these voices is not the same as never feeling them. You will feel the greed and the fear just as strongly as everyone else - that's simply being human, and anyone who claims they feel nothing is fooling themselves. The goal was never to stop feeling the pull. It's to stop obeying it: to feel the full force of the crowd and the voice, and still keep your hands on the promise you made in calm. Combating negative influences doesn't make you cold. It makes you someone who can feel the storm completely and still steer straight through it.