A symbolic Inception-style totem spinning on a desk beside market charts, representing the investor’s struggle to distinguish reality from the stories their mind creates.

Every investor is scared of drawdowns.
Every investor is terrified of bear markets.
And every investor, secretly, thinks they’re immune to stupidity because they’ve read at least one finance book and follow five experts on X (formerly known as a platform where people pretended to be rational).

But the truth — an inconvenient one — is this:

The biggest risk in investing is not the market.
It’s the story your own brain whispers to you.

We all like to believe we operate in a world of charts, ratios, screener data, discounting cash flows like a monk chants mantras.
But the real world of investing is not built on numbers.
It is built on narratives.
These narratives are created by markets, or managements, or mutual funds.

And most important part is created inside your own skull.

Welcome to the real battlefield: your mind’s storytelling engine.

Table of Contents

1. THE BRAIN: EVOLUTION’S MOST TALENTED FICTION WRITER

We humans think we are rational.
Markets know better.

Your brain was not designed in a Bloomberg lab.
It was designed on a savannah where the biggest risk was a tiger, not a twenty-bagger temptation.

Back then, you didn’t need accuracy.
You needed speed.
You needed certainty.
You needed a story, any story —> that kept you alive.

And that’s why the brain still behaves like this today:

Reality arrives as chaos
The brain panics
It ties three random dots together
And presents you a beautifully coherent explanation…
that has the logical strength of a WhatsApp forward

It doesn’t matter if the dots were related.
It only matters that the story made you feel safe for five seconds.

That’s why markets move.
Not because of GDP data
because of the stories people invent to avoid feeling uncertain.

2. WHY YOU AND BILLIONS OF OTHERS CONNECT DOTS THE SAME WAY

If you ever wondered why the entire market becomes bullish on the same sector at the same time, relax.
It’s not because everyone suddenly discovered hidden wisdom.

It’s because everybody’s brain comes pre-installed with:

Confirmation Bias 7.0
Narrative Fallacy Premium Edition
Overconfidence Plus (Lifetime Subscription)

We’re all running the same prehistoric operating system.

Show humans some numbers — they’ll build you a forecast.
Show them a forecast — they’ll build you a fantasy.
Show them a fantasy — they’ll build you a portfolio.

Humans may disagree on politics, cricket teams, and pani puri spice levels.
But on one thing, they’re carbon copies:

Everyone wants a story that makes sense, not a reality that is true.

3. THE SECRET BUGS IN THE HUMAN OPERATING SYSTEM

Now let’s talk about the hidden glitches that trip even the smartest —> the behavioural equivalent of software crashes.

3.1 The Coherence Addiction

Humans can watch 7 straight hours of Netflix but cannot bear 5 seconds of uncertainty.
So the brain cooks up a neat explanation for absolutely anything, even if the explanation is nonsense.

Markets don’t need to make sense.
Your brain does.

3.2 Bias on Auto-Pilot

You are not choosing your opinions.
Your opinions are choosing you.

Decisions are made emotionally in the basement of your mind.
Your intellect arrives later and drafts a press release explaining why it was a brilliant idea.

3.3 Noise: You Are a Different Analyst Every Day

Same data.
Different mood.
Different decision.

You don’t realise this because your brain wraps inconsistency in elegant justification.

3.4 The Great Confidence Scam

Humans are capable of being confidently wrong for decades.
Ask people who bought peak PSU stocks in 2008.
Or people who said “Tesla is finished” every year since 2013.

Confidence sells.
Accuracy whispers.

3.5 Storytelling Without Consent

You’re not the writer.
You’re the audience.

The narrative forms automatically.
Your brain simply informs you of your new beliefs like a software update.

3.6 Hindsight Editing

After an outcome, the brain quietly rewrites memory to make it look inevitable.

You didn’t “see the crash coming.”
Your brain is lying to protect you.

3.7 The Amplifiers: Media, Markets, and Friends

Modern markets don’t spread information.
They spread emotions.

Narratives go global before reality even wakes up.

And yet we ask why people make stupid trades.

4. REALITY VS. PERCEIVED REALITY: TWO DIFFERENT UNIVERSES

There are two worlds:

A. Objective Reality

Cold, hard, indifferent truth.
Cash flows, competition, execution, economics.

B. Perceived Reality

The colourful, emotionally decorated story running inside your mind.

Investors rarely operate in A.
They live in B.

Two investors look at the same P&L.
One sees opportunity.
One sees danger.
One sees a multibagger.
One sees a meltdown.

The company hasn’t changed.
Only the story has.

Wisdom is not knowing the truth.
Wisdom is knowing how much of what you believe is a story.

5. THE P&L STATEMENT: THE MOST RESPECTABLE STORY IN FINANCE

Let’s be honest.

When you open Screener and admire a company’s numbers, you are not looking at reality.
You are looking at:

accrual accounting
assumptions
interpretations
management judgment
auditor acceptance
and finally… your own imagination layered on top

Numbers are not truth.
They’re stories told according to accounting rules.

Retail investors don’t have forensic teams.
Even institutions get fooled.

And yet…

You don’t need absolute truth to make money.
You just need to avoid the obviously fake stories.

Cash flows don’t lie often.
Management does.

6. THE INCEPTION TOTEM FOR INVESTORS:

A 3-SECOND TEST TO KNOW IF YOU’RE IN A STORY

Here’s your instant reality detector — like the spinning top in Inception.

TOTEM 1: Evidence vs Emotion Test

Ask:
“If I remove my feelings, what remains?”
If nothing remains → you’re in a story.

TOTEM 2: The “If I Didn’t Own It…” Test

Ask:
“Would I still believe this if I had zero position?”
If no → story.

TOTEM 3: Disconfirming Evidence Test

Ask:
“What would prove me wrong?”
If you can’t answer → you’re dreaming.

These three questions have saved more portfolios than any ratio ever invented.

7. TAM: THE GRANDEST STORY THE MARKET LOVES

Every great investor makes one dangerous bet:

“The company’s market is big today…
but trust me, it will be much bigger tomorrow.”

This is storytelling at its finest.
And completely unavoidable.

But here’s how pros separate fantasy TAM from credible TAM.

✔ A TAM story is strong when it:

aligns with existing behaviour
doesn’t require miracles
has multiple paths to success
is consistent with the company’s past
is anchored in present cash flows
survives “What breaks this story?” analysis

✘ A TAM story is weak when it:

requires people to behave like superheroes
collapses if one assumption fails
contradicts industry history
depends on perfection
is held together by hope rather than cash flow
cannot answer “What will prove me wrong?”

Great investors don’t look for perfect predictions.
They look for robust stories, stories that work even when life misbehaves.

8. WHERE THE REAL EDGE LIES

People think investors beat the market by predicting the future.

Wrong.

Investors beat the market by escaping their own stories sooner than others.

That’s the entire game.

The ones who understand:

What is reality
What is perception
What is interpretation
What is emotional narrative
And what is sheer fantasy

…are the ones who compound wealth decade after decade.

You don’t need a genius brain.
You need a brain that can say:

“This is my story.
But it might be wrong.
Let me check.”

That humility is the ultimate edge.

THE FINAL WORD

Reality exists.
But your mind rarely shows it to you directly.

It shows you a version you can emotionally survive.

The investor who learns to subtract these stories, even a little, steps closer to truth.

And in markets, truth compounds faster than fantasy.

Because the market rewards clarity…
and punishes storytelling.

Unless you write the story yourself.

If you liked this blog, you might enjoy my previous ones as well:

👉 Why Cheap Stocks Trap You — The Psychology Behind It

👉Why Nifty Is at All Time Highs but Your Portfolio Is in the Basement

👉AI Won’t Crash Like 2000. It Might Correct Like 2008 — When Reality Finally Shows Up.

👉Strong USD Is Not a Modi Issue or a Congress Issue — It’s Global

👉 Why We Feel Smarter After a Stock Falls: The Psychology of Market Regret

👉 Why Comparing Your Portfolio to Others Destroys Your Returns

👉Is Your Stock a Hidden Pump-and-Dump?

Harsh Bhojwani

Website | + posts

Harsh is the creator of Dalal Street Lens, where he writes about investing, market behaviour, and financial psychology in a clear and easy way. He shares insights based on personal experiences, observations, and years of learning how real investors think and make decisions.
Harsh focuses on simplifying complex financial ideas so readers can build better judgment without hype or predictions.
You can reach him at imharshbhojwani@gmail.com

The Investor’s Illusion: Why Your Mind’s Story Is Your Biggest Market Risk