The Danger of the ‘High Water Mark’ when investing

We’ve all been there.
You log into your investment account, and there it is — that glorious moment your portfolio hit its highest value ever.  £500,000 – £1 million — whatever the number, it felt good. You mentally locked it in. “That’s my new standard,” you thought.

Then… markets wobbled. Things pulled back ( as they often do from a peak).
Suddenly, you feel like you’re £50,000 down — even though, funnily enough, you’re still up £150,000 from where you started.

But it doesn’t feel like a win anymore, does it?

Welcome to the psychological trap known as “anchoring bias” — or what I like to call “High-Water Mark Syndrome”. It’s one of the most common (and sneakiest) mind games your brain plays when you invest.

What’s Actually Happening?

In simple terms, anchoring means we latch onto a specific number — usually the highest value we’ve ever seen — and use it (consciously or not) as the benchmark for success.

So even if your portfolio has done brilliantly over time, if it’s below that magical peak, it suddenly feels like failure.

The kicker?
That peak was just a snapshot in time. A moment when all the market stars aligned. It was never a guaranteed new normal. Yet our brains don’t care — they mark it as “the number to beat” forevermore.

Why This Thinking Is Dangerous

Measuring your success from the high-water mark can lead to some pretty bad decisions, like:

✅ Taking too much risk to “get back” to the peak.
✅ Selling out at the wrong time because you “can’t bear seeing it drop further.”
✅ Forgetting the original plan — which was probably to grow wealth over the long term, not to hit an arbitrary number and stay there forever.

Fun fact (well, maybe not fun, but useful):
Even the best investors in the world spend most of their time below their portfolio’s peak value. Markets move. That’s what they do.

Here’s A Better Way to Think About It

Instead of fixating on the peak, ask yourself the following.  Based on my last financial review:
 Am I still on track for my long-term goals?
 Is my spending capacity still in line with my needs?
 Is my capacity for loss still at a safe level?

 Is my investment return rate still achievable?

And one of my favourites for those that check your balances too often…..

Do I own my money or does my money own me?

Because wealth isn’t built at the high-water mark — it’s built in the consistent compounding over time.

Question –  In the above chart showing the AFI balanced benchmark over the last 12 months, ,where do you measure your success from? Last March or this February?

Managing the Emotional Rollercoaster

Here’s the good news: You can train your brain out of this habit.

• Focus on the trend, not the high points. A steadily rising mountain range beats one random peak.

• Celebrate progress from where you started, not just the peaks.

• Remember why you’re investing. Hint: It’s not to win some imaginary game of “How high can I go?”

And when in doubt, give us a call. Sometimes the best investment advice isn’t about markets — it’s helping you zoom out and see the bigger picture.

Final Thoughts

Your portfolio’s high-water mark is just a number.
It’s not your financial plan.
It’s not your retirement.
And it’s definitely not your self-worth.

Let’s keep our eyes on the real prize: building a resilient, flexible plan that helps you live the life you want — through the highs and the inevitable lows.

best regards

Brian