Money Illusions: 9 Common Beliefs That Keep Smart Investors Stuck

In investing, what you think you see can be far more dangerous than what’s actually there. That’s the trap of money illusions—mental shortcuts and false beliefs that distort reality, skew your judgment, and lead even the sharpest investors astray. These illusions don’t announce themselves. They masquerade as logic, disguise risk as safety, and often reward short-term comfort over long-term clarity. The result? Stalled portfolios, missed opportunities, and confidence built on shaky ground. In this article, we unpack 9 of the most deceptive money illusions that quietly sabotage investor success. You’ll learn where they come from, why they persist, and—most importantly—how to spot and dismantle them before they cost you. Because in the markets, seeing clearly isn’t optional—it’s everything.

1. The Illusion of Nominal Returns

Nominal returns often lure investors into a false sense of security, as they reflect the gross earnings from an investment without considering inflation. This illusion can be particularly deceptive during periods of high inflation, where the real purchasing power of returns is significantly eroded. For instance, a 5% nominal return might seem attractive, but if inflation is 3%, the real return is only 2%. Investors focusing solely on nominal returns may find themselves trapped in a cycle of perceived growth that does not translate into actual wealth increase. Understanding and calculating real returns is crucial to breaking free from this illusion.