One of the most common investing mistakes has nothing to do with choosing the wrong fund or missing the bottom of the market. It comes down to how we talk about investment decisions in the first place.
We tend to describe past market movements as if they are still happening. The market is trapswhat should I do? My investments are earn more than the interest on my debt, why should I pay it off?
But those statements are already outdated. The market fell. Your investments earned 20 percent. None of that tells you what happens next.
Our brains are wired to focus on what just happened. Recent losses feel urgent and permanent, while recent gains feel comforting and repeatable. That’s not a personal failing, it’s just how recency bias works. The problem is that investing only works in the future tense.
The market fell. It doesn’t go down. Your portfolio has had a great year. It’s not a great year. The only question that matters is whether your current portfolio still makes sense in the future, given what you know today and what you are trying to achieve.
This mistake is most apparent when people talk about selling an investment that has fallen sharply. The usual framing sounds like this.
“I don’t want to sell now because I would make a loss. I’ll wait until it gets back to where I bought it.”
But that framework is backwards. The money you invested is already gone. What you actually have today is the current market value of that investment.
The right way to think about it is to imagine that you are currently holding that amount in cash. If the money were in your account, would you use it today to buy the same investment, at today’s price, with today’s information? If the answer is no, then holding it is simply the same decision repeated through inertia.
Selling a losing investment doesn’t mean admitting defeat. It updates your decision based on new information. Not selling is still a decision, but a decision made by default rather than an intention.
The same logic applies after strong returns. A share or fund that did very well last year does not deserve a permanent place in your portfolio. Past performance does not create any future obligation. Every holding company must justify its position based on expected future returns, and not on recent results.
This is also where broad index investing changes the conversation. When you buy an individual stock, you are specifically betting on its future direction. You need that business to execute, grow and outperform what the market already expects. Timing is important. Being wrong matters too.
And the odds are greater than most people realize. Research by Hendrik Bessembinder shows that most individual shares are losers in the long term. Many go bankrupt. Most do not outperform short-term government bonds over their lives. The stock market’s overall gains come from a relatively small number of extreme winners, meaning that picking individual stocks requires finding the exceptions, not just avoiding obvious mistakes.
When you buy a globally diversified ETF like VEQT, you’re not betting on a single company or a narrow outcome. You are purchasing ownership of thousands of companies across the global economy. The bet is not that prices will continue to rise in the short term. The bet is that global companies will continue to generate profits and grow over time.
Therefore, a global index fund that is “high” is not the same as an individual stock that is overvalued. Markets spend a lot of time near record highs because more often than not, long-term growth is positive. Expected returns come from owning future earnings across the entire market, not from predicting what will happen next.
Investing becomes easier when you stop asking what just happened and start asking what you would do today with the money you have. The past is interesting, but it is no longer feasible. The only decisions that matter are the ones you make while looking ahead.
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