Understanding your anxiety and financial behavior can help you learn to stay in control and avoid damaging investment decisions, while also helping to keep you on track.

If you’ve ever regretted a financial decision, you’re not alone. In fact, you might be in very good company – most of us have probably asked ourselves at some point, “Why did I do that?” or “Why didn’t I do that?”

Whether it’s jumping on a trend, following unsupported opinions or recommendations, or even hesitating to act on the right investment advice or principles, your decisions were likely guided by your emotions. Sometimes we make financial decisions from a place of fear or greed. Sometimes from excitement or anticipation. And sometimes we feel the pressure and fear of “falling behind” or “missing out” – also known colloquially as FOMO (Fear of Missing Out).  

The 2025 Financial Stress Index from FP Canada reveals money is a top source of stress for Canadians. While not everyone experiences financial anxiety, the report found over 50% of Canadians are afraid of making the wrong financial decision, and 43% admit to procrastinating due to stress or anxiety.¹

Unfortunately, when we let our financial anxiety take the wheel, the emotional rollercoaster that follows can impact our financial behavior and how we respond to money matters. This can ultimately result in poor outcomes and lost opportunities to build wealth and achieve your financial goals.

Your financial behavior – is it the anxiety talking?

As humans, our emotions, habits and intuition are often at the forefront of our decision making, leaving logic and rationality to take a back seat.

When we do this, the emotional aspects of investing and financial planning (e.g., estate planning) become intertwined with and driven by our anxiety, taking over how we respond to these important decisions. For example, individuals who feel anxious when looking at market performance tend to be more focused on potential negative outcomes, leading them to avoid risks and losses. As such, they are also more prone to making emotional, impulsive and reactive decisions. 

These emotional responses are part of our behavioral patterns, but they are not random reactions. “The urge to relieve anxiety often masquerades as rationality,” says Michael Sherman, Director of Behavioral Economics at RBC. “Most impulsive investment moves are attempts to quiet a nagging feeling, not improve an outcome.”   

Our financial behavior is often linked to deeper responses, such as FOMO and loss aversion, all of which magnify our anxiety:

FOMO: The fear of losing out on financial opportunities, leading to irrational decision making. Studies have shown that individuals who feel FOMO when making financial decisions can act impulsively when driven by anxiety.² FOMO-driven behavior is characterized by:

• Diving in headfirst before doing more research and/or investment planning
• A tendency to spend impulsively and participate in risky investments
• Overtrading, where investors make frequent trades to capture rapid gains, despite increased transaction costs and the potential for poor market timing
• Chasing after high-performing stocks that are overvalued or don’t fall within your risk profile and portfolio structure

Loss aversion: The tendency to pour in time, energy and/or money to avoid experiencing a financial loss. For instance, the fear of losing $1,000 is often far greater than the joy from gaining the equivalent amount.³ An investor’s anxiety tends to magnify when the fear of financial losses consistently lingers on their minds. Their decision-making is characterized as follows: 

• May feel tempted to sell assets out of fear that investments will continue to go lower if they hold
• Initially reluctant to invest in the market out of fear that the value of their assets will fall
• May hesitate to sell investments below their original cost to avoid realizing a loss, which can potentially lead to an even greater loss and miss other opportunities⁴
• A tendency to frequently and nervously watch the markets during downturns

Investor, know thy self - helping to navigate through your financial anxieties

While your financial behavior won’t change overnight, gaining awareness of how anxiety influences your financial behavior is the first step to achieving insight into how to control it. By understanding your emotional patterns and behaviours, you can better navigate through the ups and downs that often come with financial anxieties and start making decisions from a place of clarity. Here are a few helpful pointers:

FOMO

Loss aversion

Get a second opinion from your advisor to avoid missing investment opportunities or making impulsive financial decisions Build an investment strategy so you can feel at peace with YOUR money goals and risk tolerance. Every investor has unique circumstances, and their financial decisions don’t apply to your circumstances Take a timeout and examine the credibility of the “herd” and popular investments

Check markets once a week to cut back on frequent monitoring Regularly review your investment plan and portfolio with your advisor. Your investment decisions should be based on your plan, which is intended to serve through various market cycle stages to help you achieve your goals Keep moving forward and focus on your long-term investment goals. Try not to dwell on previous losses and short-term market movements

 

Lending a helping hand – your advisor is there to help you stay on track

While personal growth takes time, getting started is what matters – and, importantly, you’re not alone!

Your investment advisor can help you avoid emotionally driven decision-making by establishing a personalized and goal-focused plan that appropriately reflects your risk profile.

By working together, you can leverage your advisor’s expertise and knowledge to help remove emotion from your decision making. This can help you thoughtfully and rationally consider how every financial decision will impact your journey to success. Disciplined plan-driven decisions will help make your wealth-building journey smoother and more impactful. Your advisor can help put your mind at ease, in turn helping you to let go of your fears and anxiety.

Talk to us today about how we can help.  

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Sources

1. FP Canada. “The 2025 Financial Stress Index: Key Takeaways for Financial Planners.” FP Canada. https://www.fpcanada.ca/newsdetail/the-2025-financial-stress-index--key-takeaways-for-financial-planners
2. Hariany Idris. “The Effects of FOMO on Investment Behavior in the Stock Market,” Golden Ratio of Data in Summary 4, no. 2 (October 30, 2024): 879–87, https://doi.org/10.52970/grdis.v4i2.757
3. Investopedia. “Loss Aversion: Definition, Risks in Trading, and How to Minimize.” Investopedia. https://www.investopedia.com/terms/l/loss-psychology.asp
4. Trustnet. “Loss aversion: Understanding the fear of loss in investing.” Trustnet. https://www.trustnet.com/investing/13430613/loss-aversion-understanding-the-fear-of-loss-in-investing

This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc.*, RBC Phillips, Hager & North Investment Counsel Inc., RBC Global Asset Management Inc., Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliate, Royal Mutual Funds Inc. (RMFI). *Member – Canada Investor Protection Fund. Each of the Companies, RMFI and Royal Bank of Canada are separate corporate entities which are affiliated. The information provided in this document should only be used in conjunction with a discussion with a qualified professional advisor when planning to implement a strategy. â/ ™ Trademark(s) of Royal Bank of Canada. Used under licence. © Royal Bank of Canada. (2025). All rights reserved.