It was just another routine flight for Rudolf Erasmus, piloting a small aeroplane with four passengers, till at 11,000 feet, he felt a cold sensation near his hips. Initially thinking of water dripping from a bottle, he turned to his left only to be stunned by the presence of an uninvited guest, a Cape Cobra, one of South Africa's deadliest snakes.

Controlling his nerves, Rudolf managed to land the aircraft safely in the next fifteen minutes. Once landed, he allowed his guests to deboard and then moved his seat forward and saw one of the most chilling sights of his life: the cobra curled under his seat.

As a pilot, one undergoes rigorous training for various scenarios, but navigating an aircraft with a snake beneath one's body defies preparation. Rudolf's response displayed extreme behavioural alpha when it mattered, a trait distinguishing an achiever from an aspirational champion. This concept is crucial in understanding the impact of an individual's behaviour in extreme situations, which also has significant implications for investment decisions.

The stranger within me

When confronted with extreme circumstances, we possess the innate capacity to behave in a manner we might never have imagined. These situations can push us to our limits and reveal aspects of our behaviour that we may not have been aware of.

British author William Golding explores this phenomenon in Lord of the Flies, one of the most influential novels on human psychology. When a group of schoolboys become stranded on an island, they not only exhibit adult-like behaviour but also descend into savagery and violence when faced with extraordinary circumstances.

This outrageous behaviour, as depicted in the novel, reflects how we all can behave as individuals in extreme situations. It serves as a cautionary tale in behavioural finance, highlighting the potential for drastic shifts in behaviour when faced with unexpected circumstances.

The behavioural blind spots

In good times, every conservative investor overestimates himself as aggressive, but in bad times, even many seasoned investors become fearful. There is nothing unnatural with this shift in risk-taking capacity, but it is a critical aspect to consider during portfolio construction.

We often visualize our financial future from our current mental, financial, and situational standpoint. However, life is inherently unpredictable. This emphasis the need for adaptability and resilience in our investment decisions.
When it really matters

• The real test of commitment is not in making lofty New Year's resolutions or the initial excitement of executing them, but in emerging from the blanket on a cosy morning weeks later to go for a jog.
• We can be studious round the year, but how we perform during those three hours of examination, matters.
• The strength of marital vows is only tested during moment of crisis.
• We can perform proficiently during a driving test. But it matters only when we can successfully suppress the temptation to overtake a slow-moving vehicle in curves.
• We celebrate growth during market highs, sharing optimism online, but the real test is staying patient and avoiding impulsive reactions in downturns.

Avoiding big mistakes

Our weaknesses, fallacies, and biases make us human. We need not be perfect; we have to avoid big mistakes.

It's normal to indulge in a scoop of ice cream or an occasional puff or to feel uneasy about negative trends in our investment portfolio during a market downturn. However, turning occasional indulgence into habit, or discontinuing SIPs are not just minor missteps. They are significant mistakes that can hold us back from staying above average. These choices carry consequences that can profoundly affect both your life and investments.

Many natural principles are beyond human control. Yet, our ability to control impulses and resist instant gratification makes the difference, and investment is no different.

Probabilities in life are very different from those in math problems. In a math exam, if we were asked to find the chance of drawing a red ball from an urn with ten balls, the answer is clear. But in life, we don’t always know all possible outcomes. Instead, our path is shaped by how we react to each situation.

Recognising Patterns in the Obvious

Every knowledge we earn is eventually pattern recognition. However, despite this, we often miss things that are so obvious.

It was during a late summer day in 1666 when the gravity's father became fascinated with an apple falling from a tree. The reason may seem obvious today, but it missed the attention of the entire human race, who would have seen it a zillion times since the existence of humanity.

Leave aside ordinary human beings, surprisingly, two of the most outstanding scientists to have ever lived on earth and considered the fathers of astronomy even overlooked such a dramatic discovery during their lifetime.

Similarly, the role of "t" in the compound interest formula P (1 + r)^t and the fact that markets fluctuate are two of the most common concepts in investing. Yet, we often overlook their true impact, even though basic math shows how powerful they can be for wealth creation.

It doesn't matter what we know or how deeply we understand; the real essence is how we behave when it matters.