Hold my beer

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  By Guest Blogger Doug Rowat

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According to a recent YouGov survey, almost 1 in 3 people (and nearly half of men) believe they could successfully land a commercial airliner if the pilot became incapacitated:

Could you land a commercial airliner if the pilot became incapacitated?

There’s never been an incident of a non-pilot taking charge of a commercial airliner and being successfully “talked down” by air-traffic control, and no flight-simulator studies with sufficient sample sizes exist, but naturally, the success rate would be nowhere near as high as these optimistic respondents think. And regardless, a flight simulator would never capture the true pressure of this actual life-or-death scenario anyways.

But the point is, overconfidence deceives us (and in the case of the survey respondents, likely sends them towards the side of a mountain). When we’re overconfident we draw optimistic—and improbable—conclusions about outcomes.

None of our readers are at risk of being forced into an airliner cockpit, but many are figuratively at the controls of their investments. So below are ideas to counteract overconfidence bias. Think of these as tips for enabling a financial safe-landing.

• Recognize that you may need help. Overconfident investors tend to invest alone, but a financial advisor can help identify damaging behavioural biases (including overconfidence) and correct them. For instance, overconfident investors tend to have concentrated portfolios and focus more on riskier small-cap stocks. A financial advisor can point out such patterns and highlight the dangers. This being said…
• …Avoid overconfident financial advisors. Excessive self-assurance may be useful in a politician (likely why Trump got elected twice), but you never want this trait in a financial advisor. You want a financial advisor who recognizes that market outcomes are frequently negative, clearly identifies the downside risks and isn’t a salesman. Overconfidence leads to overpromising. An overconfident financial advisor may, for instance, suggest a 15% return is possible when the historical data indicates that a 7% gain is more probable. Pick a financial advisor who’s willing to tell you things that you don’t want to hear.
• If you’re a do-it-yourself investor, be clear-eyed about your track record. Overconfidence results in placing more emphasis on successful trades and less on the failures. This is sometimes referred to as “selective forgetting”. Much academic research supports the notion that recalled portfolio performance is usually much greater than actual performance. Let your account statements determine your performance, not your memory.
• Never assume that you can handle anything the market throws at you. Overconfidence skews risk tolerance. Naturally, if you possess excessive self-belief you’ll assume that volatility won’t affect you. In fact, the opposite is true. A 2025 study by the Hiroshima University School of Economics of more than 160,000 Japanese investors concluded the following: “overconfidence is statistically significant and negatively associated with investment loss tolerance, indicating that overconfident investors are more prone to prematurely liquidating assets during market downturns.” In other words, when the sh*t hits the fan, overconfident investors are less lion, more Cowardly Lion.
• Ponder financial decisions. Overconfident investors are impulsive (when you’re certain you’re right, why hesitate?) but by gathering information and weighing the risk-reward over an extended timeframe, better decisions are made. This is not dissimilar to my kid’s hockey coach asking parents to wait 24 hours before firing off emails to the league—the delay always results in a better outcome. Also embrace arguments that run counter to your initial impulses. Overconfidence often results in confirmation bias where we only seek information that aligns with our pre-existing beliefs or desires. For example, if you were dazzled after a model home tour, a prudent next step might be to consider the many reasons why buying a pre-construction property is a bad idea.

Got all of that? Good. You’re cleared to land, runway one.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.