Investor Behaviour: Traffic Circles and Traffic Lights

by Jeffery A. Keill, CFP, CIM, FMA, FCSI, CEA

You might wonder why I  have been comparing driving to investing for the past few months. I think it is a simple reflection that I have been on the road all summer, logging thousands of kilometers for a myriad of reasons. During these adventures in suburbia and beyond, the time lends to ponder (sometimes with frustration) the most insidious of our daily tribulations: traffic. Most recently I drove through Kemptville, Ontario, where along one of their main roads a new traffic circle (roundabout) is being built. Navigating this was interesting, and as I proceeded to my destination to Chesterville it gave me time to once again ponder the experience.

Here is the premise today: is investing much like navigating the busy intersections of urban life, requiring choices that reflect both comfort with risk and preference for structure? If we look at how individuals respond to traffic circles (roundabouts) and traffic lights, we find intriguing parallels with the ways people approach investments. Having driven in different European and North American cities, there are certainly merits of these two intersection controls. Likewise, I propose investors intuitively weigh structured savings against the autonomous decision-making of self-directed investing. This blog draws an analogy between two types of traffic controls and investment decisions.

Traffic Lights: Structure and Predictability in Investments

Traffic lights represent clear rule and highly predictable patterns: stop, go, or wait. This is akin to investors who prefer structured products such as GICs or other forms of fixed rate investments. The comfort of explicit rules and limited choices reduces stress and cognitive load, much as traffic lights ease the driving experience by removing ambiguity and on-the-fly decision making. You, along with others at the same intersection, have a legal decision of only stop and go.

For many, the security of traffic lights parallels the peace of mind found in structure deposit type investments. They know exactly what to expect, can plan according to fixed timelines, and the benefit from the stability of contractual promises. However, just as long red lights can frustrate drivers waiting at empty intersections, investors may regret missed opportunities while other seem to get further ahead.

Traffic Circles: Self- Directed Investing with Autonomy

Traffic circles allow drivers to act independently, making real-time decisions about merging, yielding, and exiting. This mirrors the behaviour of investors who favour autonomy, preferring to evaluate opportunities themselves, adapt strategies on the fly, and take direct control of their portfolios through managed products such as mutual funds, EFTs, or direct access to individual marketable securities.  Just as traffic circles require continuous attention to the moving environment, ongoing decision making, and adaptability, so too does self-directed investing.

The initial experience with traffic circles can be unsettling for those who lack experience with them- much like self-directed investing in markets for those entering the roundabout the first time. The lack of fixed signals means investors must rely on their judgement and assess risk dynamically. Over time, those who embrace autonomy often become comfortable, finding satisfaction in the smoother, more flexible flow of decision-making and the potential for greater returns.

Safety Perceptions and Investment Realities

The perception of safety often drives intersection design- and investment preference. Many instinctively favour traffic lights, trusting rules and protocols to protect against the unexpected. Similarly, many investors gravitate toward fixed deposits with robust guardrails, hoping to avoid losses.

Yet research tells us that, like roundabouts, self-directed and flexible investment approaches can lead to greater long-term success and fewer “severe” collisions” - provided that one is educated and attentive, and lets long-term economic history prevail. One unnoticed benefit of the safety of the ‘roundabout’ is that vehicles are seldom directly at a right angle at impact, and thereby dramatically reduces the risk of serious injury to all unfortunate parties. The key to this desirable investment approach is balancing risk with awareness while learning from experience. Over time, comfort with autonomy increases, just as confidence grows in adaptive investment portfolios with experience.

Conclusion: Learning to Drive with Structure and Flexibility

Whether navigating traffic circles or traffic lights, our choices reflect our underlying comfort with ambiguity, desire for guidance, and willingness to adapt. Both intersection controls - and both investment styles - have their place. The most successful investors, like the most agile drivers, understand how to balance order and flexibility, using structure when needed and embracing autonomy when opportunities arise.

Our clients at K&A generally seek to grow their wealth and navigate complexities of financial markets. Our Wealth Advisory Team recognizes and can guide clients to strategies that suit their personalities and goals. Ultimately, investment success is not just about choosing the right products, but understanding how we respond to change. Sometimes, learning to navigate traffic circles like the newest one in Kemptville can lead to smoother, more rewarding journeys.

Published September 17, 2025