Why Feeling in Control Often Leads to Worse Outcomes
Introduction: When Confidence Feels Like Competence
Investors value control.
They seek information, forecasts, frameworks, and tools that create a sense of mastery over uncertain outcomes. When decisions feel deliberate and informed, confidence rises. When confidence rises, action feels justified.
This is comforting—and often misleading.
One of the most persistent behavioural biases in investing is the illusion of control: the tendency to overestimate how much influence one has over outcomes that are largely shaped by uncertainty, randomness, and timing.
This article examines how the illusion of control manifests in investing decisions, why it persists even among experienced investors, and why feeling in control often increases risk rather than reduces it.
What the Illusion of Control Actually Is
The illusion of control is not recklessness.
It is the belief—often subconscious—that:
- Better analysis guarantees better outcomes
- More information reduces uncertainty meaningfully
- Skill can reliably overcome randomness
- Active decisions improve results
- Timing can be consistently improved
This belief does not require arrogance. It often emerges from diligence, effort, and genuine engagement.
The more work investors do, the more control they feel—even when outcomes remain largely uncertain.
Effort creates confidence.
Confidence creates action.
Action creates exposure to error.
Why Investing Feels Like a Control Problem
Investing is particularly prone to the illusion of control because it combines:
- Continuous feedback (prices, news, commentary)
- Narrative explanations for outcomes
- Occasional reinforcement of correct calls
- Tools that simulate precision
Markets provide just enough feedback to sustain the belief that outcomes can be steered with sufficient insight.
When a decision works, it feels earned.
When it fails, it is attributed to unusual circumstances.
This asymmetry reinforces the illusion.
Control Bias and Overconfidence
The illusion of control is closely linked to control bias and overconfidence.
As investors gain experience:
- They identify patterns more quickly
- They develop stronger views
- They become more comfortable acting
- They intervene more frequently
Each successful intervention strengthens belief in control.
The problem is not that investors are sometimes right.
It is that correctness is often over-attributed to skill and under-attributed to context.
This leads to:
- Excessive trading
- Tactical overreach
- Premature adjustments
- Overconfidence in timing
The illusion of control turns uncertainty into a false sense of agency.
Prediction Illusions in a Probabilistic World
Markets operate probabilistically. Outcomes are shaped by distributions, not certainties.
Yet investors often behave as if:
- Forecasts can be made precise
- Turning points can be identified reliably
- Risks can be fully mapped in advance
Prediction feels like control because it offers a narrative of inevitability.
In reality:
- Correct forecasts can still produce losses
- Incorrect forecasts can still make money
- Timing dominates outcome far more than insight
The illusion lies in believing that prediction equals influence.
Why More Information Often Increases the Illusion
Access to information is widely seen as an advantage.
In practice, more information often:
- Increases conviction without improving accuracy
- Encourages frequent reassessment
- Amplifies noise relative to signal
- Creates pressure to act
Information creates the feeling of control even when it does not materially improve decision quality.
This is why investors with the most data are not always the most disciplined.
Information changes confidence faster than it changes outcomes.
The Cost of Acting on the Illusion
The illusion of control is costly because it encourages unnecessary action.
Common manifestations include:
- Over-trading in response to short-term signals
- Tactical shifts based on recent performance
- Frequent portfolio adjustments to “manage” risk
- Intervening in otherwise sound processes
Each action introduces:
- Timing risk
- Transaction costs
- Behavioural inconsistency
- Reduced compounding continuity
The damage is rarely dramatic. It accumulates quietly through repeated small decisions.
Control Feels Safer Than Acceptance
Accepting uncertainty is uncomfortable.
It requires admitting:
- Outcomes cannot be fully controlled
- Good decisions can lead to poor results
- Patience matters more than precision
- Restraint can outperform activity
The illusion of control feels safer because it replaces uncertainty with action.
Doing something feels better than waiting—even when waiting is optimal.
This emotional preference explains why the illusion persists despite evidence of its cost.
Why Experienced Investors Are Especially Vulnerable
Experience does not eliminate the illusion of control. It often deepens it.
Experienced investors:
- Have more stories of success
- Possess stronger pattern recognition
- Feel justified in discretionary judgement
- Are more comfortable intervening
Experience improves explanation, not immunity.
The illusion of control evolves from naïve optimism into sophisticated confidence—making it harder to detect and correct.
Institutions Design to Reduce the Illusion
Institutions recognise the danger of perceived control.
They counter it by:
- Limiting discretionary decision-making
- Separating analysis from execution
- Using rules and ranges instead of point forecasts
- Emphasising process adherence over tactical calls
- Evaluating outcomes over full cycles
These structures exist not because institutions lack skill, but because they understand that too much perceived control increases risk.
Control vs Influence: A Critical Distinction
Investors do not control markets.
They influence their own exposure.
This distinction matters.
Control implies mastery over outcomes.
Influence implies responsibility for decisions within uncertainty.
Sound investing focuses on:
- What can be controlled: process, exposure, behaviour
- What cannot: short-term outcomes, timing, market reactions
The illusion of control arises when these are confused.
Discipline Requires Letting Go of Control
Discipline is often misunderstood as tighter control.
In reality, discipline requires releasing the need to control outcomes and focusing on controllable inputs.
Disciplined investors:
- Accept variability without intervention
- Resist the urge to “fix” short-term discomfort
- Allow processes to work over time
- Limit action to predefined conditions
This restraint feels uncomfortable precisely because it relinquishes the illusion of control.
The Enduring Idea
Control in investing is largely an illusion.
What feels like mastery often increases risk by encouraging unnecessary action and overconfidence.
The more investors believe they control outcomes,
the more likely they are to interfere with what would have worked.
Enduring success comes not from controlling markets, but from controlling behaviour.
Closing Perspective
Markets will always tempt investors with the promise of control—through better forecasts, faster information, or sharper insight.
That promise is rarely fulfilled.
Long-term outcomes are shaped not by how much control investors feel, but by how well they accept uncertainty and design around it.
Letting go of the illusion of control is not surrender.
It is realism.
In investing, humility outperforms mastery more often than skill outperforms patience.