'Fear is contagious, but knowledge is power': CA breaks down how human emotions shape market

Investing success, argues chartered accountant CA Nitin Kaushik in a thread on X (formerly Twitter), has less to do with spreadsheets and more to do with the human mind. Over the last two decades, he notes, several Nobel Prizes have recognised that investor behavior — not elegant formulas — often drives market outcomes. In short: markets are social, emotional systems, and treating them as pure machines is a costly mistake.

Kaushik opens with a familiar maxim — “Be greedy when others are fearful, be fearful when others are greedy” — and reframes it. The crucial word, he says, is not greedy or fearful but others: the edge comes from thinking differently than the crowd, not from mimicking it. When markets surge, collective euphoria makes even questionable bets look brilliant; when they tumble, yesterday’s perfect plan is suddenly suspect. Emotions, not logic, dominate.

To make the point, Kaushik uses a simple image: the market as a roller coaster. The climb raises excitement, heart rates spike; the plunge triggers panic. It’s those extremes — the euphoric peaks and fearful troughs — that cause investors to make mistakes, not the steady, boring stretches. Recognising emotional extremes, he argues, is the investor’s first line of defense.

That recognition, Kaushik adds, should shape portfolio construction. Equities are the long-term engine of growth — compounding earnings over decades has historically driven India’s major indices to roughly 12-14% annualised returns when price appreciation and dividends are combined — but surges above the long-term average are often temporary and crowd-driven. For most investors, that means balancing growth with stability: commercial real estate, REITs or fixed-income instruments can smooth returns and reduce the emotional stress that causes bad decisions during downturns.

Real estate, he writes, does more than steady a portfolio. As a leveraged asset class with rental yields and predictable cash flow, carefully chosen commercial properties or REITs provide income while equities gyrate. But success in real estate, he warns, still depends on fundamentals: yield calculations, rent trends and interest-rate sensitivity matter.

Timing the market, Kaushik contends, is a perilous exercise. Instead, base-rate thinking — using the long-term growth of the economy as a floor — helps investors set reasonable expectations. Markets that outperform those base rates for extended periods typically revert; corrections are the market’s way of realigning short-term excesses with long-term reality.

He points to March 2020 as a cautionary example. When markets plunged nearly 40% during the early COVID-19 sell-off, panic was widespread. But investors, who remembered historical cycles and kept a rational framework found opportunity amid the chaos. “Fear is contagious — but knowledge is power,” Kaushik writes.

One of his vivid metaphors describes corrections as compressed springs: the deeper the fall (assuming fundamentals remain intact), the stronger the potential rebound. That view supports a disciplined approach: view drawdowns as stored opportunity rather than just losses.

Kaushik ends with a practical checklist for investors that reads like a short investor manifesto:

• • Understand psychology — know how emotions shape market moves.
• • Stay rational when others panic — don’t trade on headlines or herd impulses.
• • Structure a balanced portfolio — mix equities with income-producing, less volatile assets.
• • Use historical base rates and fundamentals — set expectations on what markets can sustainably deliver.

His final admonition is plain and pointed: markets will always fluctuate. “Those who master emotional control, respect history, and plan strategically are the ones who thrive — not the ones chasing headlines or short-term highs,” Kaushik writes. And, in a line both curious and memorable, he closes: “The brownie isn’t for following the crowd — it’s for staying smart when others aren’t. Think independently, act patiently, and let time reward discipline.”

Whether a novice building their first portfolio or a seasoned investor tempted by the next big rally, Kaushik’s thread is a reminder that good investing begins in the mind. Numbers matter — but only after behavior is tamed.