Action vs. Discipline

Doug Walters, CFA

Markets are rarely short on reasons to worry. Yet behavioral research suggests that uncertainty often triggers a powerful urge to act, even when no action is warranted. This week, we explore the concepts of action bias and regret aversion, and why disciplined investing sometimes means resisting the temptation to respond to every perceived threat.

A goalkeeper stands confidently in the center of the goal, symbolizing patience, preparation, and disciplined decision-making during uncertain conditions.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

It’s been a while since I’ve discussed what investors can learn from soccer goalkeepers. I somehow missed the opportunity to bring it up during the World Cup. That’s particularly surprising since, as I write, I’m flanked on either side by soccer fans. Yet, despite the miss, now is perhaps a better moment in time for the reminder.

Regular readers will remember this study¹. Researchers examining professional penalty kicks discovered something curious. Goalkeepers overwhelmingly dive left or right when facing a penalty shot, even though staying in the center would have produced better results more often. Why? Because action feels better than inaction. If a goalkeeper dives and the ball still goes in, observers believe he at least tried. If he remains in the center and the ball goes in, he appears passive.

The researchers concluded that people have an “action bias.” They prefer action over inaction when facing uncertainty, particularly when they anticipate future regret. Investors are no different.

Lately, one of the most common questions we have received from clients is whether it makes sense to take some risk off the table. The concern is understandable. US equity markets have risen year-to-date. Artificial intelligence remains a dominant investment theme. The 10Y Treasury yields made headlines when it briefly topped 5% this week. Questions about inflation, government debt, and economic growth continue to make headlines. It is easy to construct a long list of reasons why markets could decline.

The key word is could. These are exactly the moments when action bias and regret aversion begin to take hold. An investor may think:

“What if I leave my portfolio unchanged and the market falls 20%?”

It is easy to imagine the future regret of doing nothing, and that imagined regret can push toward action…

Sell something.
Raise cash.
Reduce risk.
Do something.

The challenge is that uncertainty alone is not evidence that action is warranted. One of the enduring lessons from behavioral finance is that activity and good decision-making are not the same thing.

Markets are always surrounded by uncertainty, yet they have generally risen over time. This does not mean action is never appropriate. Sometimes it absolutely is. Financial goals change. Risk tolerance changes. Cash needs evolve. Portfolio concentrations occasionally become excessive. In those situations, action may be entirely appropriate.

In fact, thoughtful rebalancing is one of the ways we seek to manage risk over time. Recent gains can create concentrations that deserve attention. But those decisions should be driven by portfolio fundamentals, not simply by the feeling that something bad might happen. That distinction matters.

At Strategic, we spend a great deal of time evaluating risks. Our responsibility is not to ignore uncertainty. It is to decide which risks warrant action and which are simply part of being a long-term investor.

Returning back to our goalie friend, inaction does not mean doing nothing. Top tier goalies work hard on their understanding of the game, strength, reactions, speed, diving, and opponent tendencies. That preparation gives them the confidence to hold their ground when the situation calls for it.

For investors a well-designed portfolio and process is the preparation. Diversification, asset allocation, rebalancing, tax management, and risk controls are decisions made in advance to prepare for uncertain environments.

As we face the current artificial intelligence investment boom, our thoughts are not on market timing. That is not part of our evidence-based process. Rather we continue to look at our portfolios for any pockets of risk that might be building, and where necessary, right-size those risks.

This is not action driven by fear of regret. It is the disciplined execution of an investment plan built for uncertain environments.

1. Michael Bar-Eli, Ofer H. Azar, Ilana Ritov, Yael Keidar-Levin, and Galit Schein, “Action Bias Among Elite Soccer Goalkeepers: The Case of Penalty Kicks,” Journal of Economic Psychology 28, no. 5 (October 2007): 606–621, doi:10.1016/j.joep.2006.12.001.

In investing, what is comfortable is rarely profitable.
Robert Arnott

One thing to watch

Investors will be closely watching this week’s Federal Reserve meeting. Both the rate decision and commentary will be important. While markets often focus on whether rates move up, down, or remain unchanged, the broader message about inflation, economic growth, and future policy expectations may also influence investor sentiment.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $3 billion, as of 6/3/26.

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