Concept Creep in Investing: How Our Changing Definitions Shape Markets and Behaviour from Alan Botha
Have you ever noticed how certain financial terms seem to mean more things than they used to? What used to be considered a normal market correction is now labelled a “crash,” and what was once a reasonable investment strategy might now be called “too risky.” This phenomenon is known as concept creep, a psychological idea introduced by Nick Haslam. Originally used to explain how definitions of harm and trauma have expanded, concept creep also plays a significant role in how we think about investing and financial markets.

What is Concept Creep?
Concept creep happens when a word or idea gradually broadens in meaning, covering situations that were not originally included. In investing, this can affect how we define risk, harm, speculation, and even what counts as an ethical investment. Over time, as definitions expand, investors may react differently to the same market conditions than they would have decades ago.

1. Risk is not what it used to be:

Risk has always been a key factor in investing, but what we consider “risky” has changed. Traditionally, risk referred to the chance of permanent loss of capital, meaning you might not get your money back. Today, however, risk is often equated with short-term price fluctuations, even if those fluctuations do not actually impact long-term gains.

This shift makes investors more nervous about temporary downturns. Instead of seeing volatility as a normal part of market cycles, many now see it as a sign of danger, leading to panic selling or overly conservative portfolios.

2. Investor Protection: Are we overdoing it?

Investor protection is crucial, but its definition has expanded over time. In the past, it was mainly about preventing fraud and scams (think Bernie Madoff and Ponzi schemes). Today, harm in investing can include things like high fees, bad timing, or missing potential gains.

While protecting investors from bad actors is important, excessive regulation or overly cautious policies can also prevent people from making informed choices. At some point, investing involves taking responsibility for your own decisions, even when they do not work out perfectly.

3. When did speculation become investing?

Another area where concept creep has changed our thinking is the line between investing and speculation. In the past, investing meant buying assets with strong fundamentals, while speculation was more about gambling on price movements.

Today, that line is blurrier. Strategies like momentum trading, meme stocks, and cryptocurrency investments are sometimes framed as serious investment opportunities, even when they involve elevated levels of speculation. This shift can lead to a false sense of security, making risky bets seem safer than they actually are.

4. Redefining market crashes and downturns:

The way we talk about market declines has also changed. A 10% correction used to be seen as a normal event. Now, it is often described as a “crash” or “meltdown,” even though historically, real crashes involved much sharper drops.

The problem? The more we exaggerate normal corrections, the more likely investors are to panic and sell at the worst possible time. The financial media thrives on dramatic headlines, but for long-term investors, staying calm is usually the best approach.

5. Ethical Investing: Where do we draw the line?

Ethical investing used to be simple: avoid so-called “sin stocks” like tobacco, alcohol, and gambling. But with the rise of Environmental, Social, and Governance (ESG) investing, the definition has broadened significantly.

While it is great that more investors care about sustainability and ethics, the challenge is that different ESG funds use different standards. One fund might exclude oil companies, while another might include them if they show progress toward renewable energy. With such subjective criteria, investors need to do their homework rather than assume all “ethical” investments align with their values.

Final Thoughts: How to stay grounded

Concept creep in investing is not necessarily a terrible thing, but it does mean we need to be more aware of how definitions shape our decisions. If we are constantly redefining risk, harm, or what counts as a crash, it can lead to more emotional investing and worse financial outcomes.

To avoid falling into this trap:
• Focus on long-term fundamentals, not short-term noise.
• Understand what risk really means – short-term losses do not always equal failure.
• Be cautious of media exaggerations about market downturns.
• Define your own ethical investing values instead of relying on vague ESG labels.

By keeping a clear head and questioning how financial terms are evolving, you will be in a much stronger position to make sound investment choices. After all, markets change, but common-sense investing never goes out of style.

Keep Well
Alan