Castlebay Monthly: May 2025

Callum Dunbar
Oct 30
5 min read

Welcome to this month’s edition of the Castlebay Monthly. Our feature article, "Logic Lost to Fear," reflects on the importance of maintaining composure and sound judgment in uncertain times. As external pressures mount, the ability to stand firm, guided by reason rather than reaction, remains essential.

We have shared some interesting events that may find a place in your diary over the coming months. There are also insightful articles on topics ranging from treating your leisure time as seriously as you treat your work to the crucial decisions that will shape your future and quality of life in the early stages of retirement.

David MacNeil was a guest on the Money Wise UK podcast, which we have shared with you, along with Lorna and Pamela's upcoming event in partnership with Scottish Women in Business.

The Stock Markets

Logic Lost to Fear

Have you ever noticed how differently you think about your investments during calm markets versus turbulent ones?

In the world of investing, there's a constant battle between logic and emotion. Most of the time, logic prevails, but during market declines, fear can take the driver's seat, potentially sabotaging our financial futures.

The recent uncertainty surrounding President Trump's tariff introductions is just the latest instance where market logic appears to have been overshadowed by fear. While this is simply the current "crisis of the day," it reminds us how easily headlines and short-term concerns can disrupt our rational investment thinking.

The Logical Foundation of Investing

When we strip away the complexity, investing in global equities means becoming part-owners of real businesses. These are the companies we interact with daily, making products we buy and providing services we rely on.

As owners, we're entitled to future dividends and potential share price increases as these businesses grow. This ownership model is grounded in logic and business fundamentals.

The value of our investments is based on company earnings and profitability. When a company grows its market share, its future earnings typically increase, and the share price should rise. Additionally, quality businesses can combat inflation by passing price increases on to consumers, maintaining profit margins. This is why global equities have historically been among the best hedges against inflation.

When Story and Fear Triumph Over Logic

While the logical foundation of investing is solid, our decisions are also impacted by the stories we tell ourselves about companies and markets. During periods of positive sentiment, which thankfully occur more frequently, we tell ourselves that companies will flourish and tomorrow will be brighter than today. This optimistic narrative aligns with what we observe: humans innovating, companies developing new products, and markets becoming more sophisticated.

However, we occasionally experience periods of negative sentiment when, contrary to the evidence, people collectively behave as if the future will be worse than today. Headlines turn gloomy, and a cloud of pessimism hangs over the market.

Psychologist Jonathan Haidt explains this dynamic through the metaphor of an elephant and its rider. The rider represents our logical mind (analytical and planning) while the elephant represents our emotional self (powerful and instinctive). While the rider appears to be in control, the rider usually loses when the elephant decides to move in a different direction.

In investing, our rider understands the logic of staying invested during downturns. But when markets fall, our elephant is overcome with fear and wants to flee to safety.

Many investors surrender to emotion and make decisions that are reactions to short-term events. They sell when prices are low, locking in losses and missing the eventual recovery. However, successful investors understand this dynamic and develop the emotional fortitude to keep their elephant calm when it matters most.

Standing Firm in Turbulent Times

What's most important to remember is that fear almost always dissipates in the end. No matter how intense market anxiety becomes, it has never proven permanent. The clouds of pessimism eventually clear, giving way once again to the sunshine of optimism.

In our years of advising clients, we’ve witnessed this pattern repeatedly. For example, during the 2020 pandemic crisis, we spoke with many investors who were ready to sell everything when markets plummeted in March, convinced that the global economy was facing unprecedented disaster. By reviewing their long-term plans and calming their "elephants," those who stayed invested saw their portfolios recover and significantly advance beyond pre-pandemic levels. The clients who remained disciplined are now in a much stronger financial position than they would have been had they acted on their fears.

In the words of Warren Buffett, "Be fearful when others are greedy, and greedy when others are fearful." This contrarian wisdom reminds us that the best investment opportunities often emerge when fear is at its peak.

If you're anxious about current market conditions, please don't hesitate to reach out. Sometimes, having a calm conversation about your specific situation is all that's needed to keep your investment elephant on the right path.

By maintaining discipline and focusing on the logical foundations of investing, you'll be well-positioned to achieve financial independence. After all, those who weather the temporary storms of fear are the ones who reach the shores of financial success.

Life is for Living

While we always encourage smart saving and financial prudence, enjoying the life you're working hard to build is just as important. That means making space for experiences, community, and a little fun now and then!

Here’s a roundup of upcoming events that might pique your interest. Treat yourself because balance is key, and life is meant to be lived.

Last-minute weekend plans: Edinburgh Seafood Festival

A date for the diary: The Tall Ships Races

Something for the ears: Edinburgh Castle Concerts

Read

A Method For Maximising Memories With Money [5 minutes]. Transforming the fleeting moments with your loved ones into unforgettable memories.

Ancient Wisdom Reveals 6 Secrets To A Long Life [11 minutes]. Turn your later years into a vibrant and fulfilling adventure.

How to Be Excellent at Leisure [6 minutes]. Leisure should be taken seriously and approached with the same intention as work.

4 Key Decisions for Early Retirement [4 minutes]. Crucial decisions that could shape your financial future and quality of life.

The Castlebay Corner

In the Money Wise UK Podcast episode, David MacNeil talks with host George, sharing his journey into investment management, from his early fascination with stockbroking to co-founding Castlebay in 2013.

The conversation explores Castlebay's commitment to transparency, independence and building long-term trusted relationships.

At the upcoming Money Talks event with Scottish Women in Business, Lorna and Pamela are set to discuss the M Word - Money.

At the event, they will cover pensions and investments, income and spending habits, debt and financial planning.

If you, or anyone you know, would benefit from attending, you can book using the link https://lnkd.in/gvRC4_i5. Alternatively, you can contact us directly, as we have a small allocation of tickets available.