People with the wrong attitudes and behaviors about investing end up with poor results. They get caught up in the confusion and misinformation and end up making bad decisions or no decisions. Unfortunately, based on my experience working with thousands of investors, just about everyone suffers from one or more of these shortcomings to some degree.
People believe that investing is much more complicated than it really is.
It is completely understandable. The investment industry creates most of this confusion. They want you to be confused so that you need their services.
There is a lot of complexity in the investing world, but the best investors cut through all the noise. They simplify things and focus on what really matters. As a result, they generate better investing results.
The Indecisive Investor
There are two types of indecisive investors.
The first kind ends up making too many changes to their investment strategy. They make too many decisions and constantly move from one strategy to the next. They can’t commit to any one or two strategies, and they overreact to short term results. They lack the confidence and the experience to carefully and judiciously pick a strategy and stick with it.
In most cases, fear is driving the indecision. They are afraid they picked the wrong strategy, or they are afraid they are missing a better strategy somewhere out there.
The other type of Indecisive Investor can’t make any changes to their investment strategy no matter how bad it is. Decision paralysis is a common trait of many investors. These investors get overwhelmed by all the information and they become too scared to make a change. They worry about taxes when they should be worrying about net returns after taxes.
I recently worked with an investor who had a financial advisor that was charging them 1% per year. This advisor only generated a return of 3% in 2025 – a year when the S&P 500 gained 17.9%. This investor only ended up with 2% returns after fees. But they were still working with this advisor. They were stuck.
Investors who procrastinate fall into the category of Indecisive Investors. Investors who procrastinate know that they should be making a change, but they can’t get themselves to do anything about it. They look at anything new or different as too risky even though their current strategy is costing them dearly. They are afraid of change.
Education and experience are critical to get Indecisive Investors moving in a better direction. There are a few simple things that every investor needs to know to become a better investor. We’ll cover some of them below but next we will review some of the other problem behaviors.
The Stubborn Investor
Stubborn investors also have trouble exploring better options, but it is not because of indecision. The stubborn investor has made a conscious decision to live and die by their current strategy even though it may be flawed.
The stubborn investor usually has latched on to a key truth about investing and they stick to it. This can be admirable when it involves a thorough review of all the options and of the weaknesses in their current strategy.
A common example of stubborn investors that I come across is the investor that is fully committed to the stock market at all times even when they reach retirement age. This kind of investor learned that the stock market generates the best returns in the long run. They know that stocks can fall significantly in a bear market but that they always regain those losses even if it takes several years.
Both of these key principles are true.
What they miss is the fact that a bear market in retirement can destroy their retirement plans. Older investors don’t have the luxury of time that is afforded to younger investors.
They also miss the fact that they can get the benefit of high returns from the stock market in good times and avoid the painful losses in bad times.
The stubborn investor has some of the information they need to know but they stop learning at a certain point. Part of this may be due to age. I am more stubborn now that I am older. But I like to think I am not so stubborn as to avoid new information that can help me make better decisions.
The Overconfident Investor
The last category of ineffective investors that I will review today is the Overconfident Investor.
Professional and experience investors have been humbled many times by the financial markets. I bear the scars that come with decades of investing experience.
I used to believe that I could beat the market by buying individual stocks. I learned the hard way what the research studies have proven – that less than 1% of all investors (professional and amateur) can manage an individual stock portfolio and beat the S&P 500 index in the long run.
I come across lots of stock pickers in my work who haven’t figured this out yet. Some are financial advisors and some are individual investors. The advisors are often aware of the futility of stock picking, but they do so because it is a way to justify their fees. If they simply purchased an S&P 500 index fund, their clients would balk at paying them a 1% fee every year for something they could do on their own.
Other Overconfident Investors study up on stock options and think that they can beat the market this way. Stock options are incredibly complex, and fewer people can successfully deploy an options strategy than can be successful stock pickers.
Day traders also fall into the category of the Overconfident Investor. Like the people who visit casinos, day traders will tell you all about their big wins, but you seldom hear about their bad bets. I always tell people who are day traders to look at the list of the world’s richest people and see how many day traders are on that list. Ninety percent of day traders lose money.
I come across other Overconfident Investors who have developed their own unique investing strategy that they fully believe in. When I ask them if they have back tested their strategy in different market cycles, I get blank stares. I applaud these explorers for their effort and their creativity but generating above market returns is quite another thing.
The Best Investors
The Best investors do two things:
They have done their homework, and they invest in the best funds.
They have a proven and effective strategy to avoid major losses in stock market downturns.
The Best Funds
The data is readily available to find the funds to invest in. To summarize:
Stock funds beat all other funds in the long run.
Large cap funds beat small cap funds.
US funds beat international funds.
Index funds representing the Nasdaq-100 and the S&P 500 generate annual returns of 10% per year or more and should be at the top of your list.
Bonds are lousy investments – generating annual returns of 3% to 4% and lose money when interest rates climb.
Avoiding Losses
I looked at all the similar funds and have yet to find one that is as effective as my Growth & Safety fund at avoiding losses in bear markets while also capturing the large gains of the stock market in bull markets. Some are good at avoiding losses but not so good at generating high returns in good times. Other capture high returns in bull markets but are not very effective at limiting losses in bear markets.
My Growth & Safety investing system provides the best of both worlds – high returns from the best index funds in good times and much smaller losses in bear declines.
When you have the right investment strategy that generates high returns in growth markets and protects your savings in down markets, you can be very decisive and very confident. You no longer need to worry about investing.
If you want to become one of the best investors on the planet, you should set up an appointment by clicking the link below to find out how to start investing in my Growth & Safety mutual fund. Don’t be a procrastinator or an Indecisive Investor. Act now.
You can book time on my calendar to learn more by Clicking Here.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
To be a successful investor, you must know how to evaluate different investment strategies and the investments you own.
Even many experienced investors overlook important aspects of performance evaluation. You will never know whether you have the right investment strategy unless you properly measure and assess your results.
Absolute vs. Relative Performance
It is critical to track investment results precisely and consistently. Investing is about data and measurement.
At the end of each calendar year, you should record your one-year, three-year, five-year, and ten-year average annual returns.
This gives you your absolute performance.
Absolute performance is important — but relative performance is more important. You don’t know whether your results are good or bad until you compare them to an appropriate benchmark.
For example, earning 10% in a given year may sound strong — but if your strategy should have produced 15%, you underperformed.
Industry Standard Benchmarks
The industry has developed standard benchmarks for virtually every investment category:
Large-cap U.S. stocks → S&P 500
Small-cap U.S. stocks → Russell 2000
International stocks → MSCI EAFE
Bonds → Benchmarks based on duration and type
However, comparing each investment solely to its category benchmark often leads to poor decisions.
For example, an international stock fund earning 9.6% annually over ten years may appear strong if its benchmark earned 9.5%. But if the S&P 500 earned 15.5% during that same period, you should feel differently.
International stocks have historically produced materially lower long-term returns than the S&P 500 while carrying similar or greater risk.
International stock funds have performed well recently, but a couple strong years do not offset decades of underperformance.
Many professionals argue that bonds should not be compared to the S&P 500 because bonds serve a different purpose — downside protection.
They claim bonds are safer and less volatile. That argument makes sense in theory — until you examine real-world data.
In 2022:
The S&P 500 declined 18.2%.
A leading PIMCO bond fund declined 14.4%.
Is a 4% difference compelling enough to justify earning only 2–3% average annual returns over a decade — when stocks returned many multiples of that?
I believe all passive, traditional, investment strategies should ultimately be evaluated against what long-term equity investing can deliver.
Short-term comparisons between asset classes can be misleading. For example, gold has experienced strong gains recently. That does not justify abandoning a long-term stock strategy.
Long-term results matter most.
The Proper Time Period for Evaluation
Many investors make decisions based on short-term results — three months, six months, or one year. These timeframes are often misleading.
Retirement investing typically spans 20 to 30 years. That is the appropriate horizon for evaluating strategy effectiveness.
The only thing investors need to consider when looking at short-term results is whether an investment behaved as it was supposed to. Did its performance match its stated goals or strategy? For example, if you owned a growth stock fund in 2023 it should have performed very well in the last few years. If it didn’t capitalize on a strong bull market for stocks, something is very wrong with that investment. A growth stock fund should have generated 20% average annual returns over the last three years.
Absolute investment returns are mostly meaningless in the short-term. The only thing that you need to look at in the short-term is relative investment performance – how an investment performed against its benchmark. The absolute short-term results don’t tell you anything about the future. Markets are irrational in the short term. Markets are rational in the long term.
I often see experienced investors making investment decisions based on one-month or three-month results. Unless an investment dramatically underperforms against its benchmark in the short-term, investors are making emotional decisions and not rational decisions when they make changes to their investment strategy based on short term results.
Performance Across Market Cycles
You should understand how each investment performs during bull markets, bear markets, recessions, inflationary periods, and sideways markets.
When investing long term, you will experience all economic environments. Nothing should surprise you.
Understanding What You Own
You must know why you own each investment and what drives its returns.
I favor stock investments because long-term stock prices are driven by profits and cash flow growth. Over time, markets reflect business fundamentals.
When you don’t understand your investments, you are gambling and not investing.
Understanding your investments means you know how and why your investment increases or decreases in value. You need to know what factors drive changes in the price of your investments.
It is for this reason that I do not own bitcoin. I understand why so many people are bullish on bitcoin but without an underlying metric that ties back to business value I won’t own bitcoin. There is no way to determine whether bitcoin is fairly priced or unfairly priced at any point in time.
I am not saying that bitcoin will drop in price or increase in price. I am saying that there is no way to measure its value. If I were to invest in bitcoin, I would be relying on luck. Relying on luck is speculation.
When you don’t understand an investment, you have no conviction about an investment. Using my bitcoin example, if the price of bitcoin dropped 30% from where it is at, I would not know if I should sell or buy more. When the stock market drops by 30%, I know that buying more is the right thing to do.
Conclusion
To be a superior investor:
Understand every investment you own
Measure performance annually and compare to benchmarks
Focus on five-, ten-, and twenty-year returns
Evaluate short-term results only relative to expectations and benchmarks
Demand long-term data before adopting any strategy
Don’t get influenced by stories or themes or prognostications when investing. If someone is pitching a story that sounds good, always ask for the data. How did this strategy perform over the last 20 years? How did it perform in bull markets or bear markets? How did it perform compared to other investments?
If the person pitching the story can’t answer those questions, move on.
If you want an investment strategy that is all about results and data, you should check out my Growth & Safety investment system. I know exactly how my strategy would have performed in World War II, the Great Depression, the Stagflation of the 1970s, the Great Recession of 2008 and any other period. I can tell you and show you exactly how and why it beats the results of the S&P 500 in the long run.
You can book time on my calendar to learn more by Clicking Here.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Things have not changed much in the last month. The stock market has basically been flat and the same factors are driving the day-to-day reactions and overreactions.
The chart below shows the price trends for the S&P 500 and the Nasdaq since the end of October 2025.
Prices are basically flat from the end of October until now. The S&P 500 is almost exactly flat with the highs reached last October and the Nasdaq is down about 4%. We describe this situation as the market being stuck in a trading range.
In the chart you can also see the large daily price swings. There have been several moves of 2% or more in both directions as the market is searching for a trend.
This flat market follows the huge gains posted from late April through late October last year. The S&P gained over 30% during that run and the Nasdaq gained over 40% over those six months. The fact that the previous surge has stalled out is not unusual as markets need to pause to digest the huge gains.
The AI/technology trade is one of the factors causing the daily and weekly price swings. AI capital spending continues to drive the overall economy, but the market is not certain yet about the expected returns on those investments. Recently, the market has been punishing industries expected to be hurt by AI – software companies and some financial services companies.
Unfortunately, the recent news on tariffs means more uncertainty for the market and for companies and for the economy.
Economic data continues to be mixed. Employment data has been volatile – good one month and bad the next. Inflation continues to run above the Fed’s goal of 2% but it has been stable.
If job losses accelerate, we can expect some modest rate cutting from the Fed. Fed cuts will minimize the impact on stock prices from an increase in unemployment.
Corporate earnings growth continues to be strong – above historical averages. Corporate earnings growth needs to stay above average to sustain the high stock market valuations.
My stock market valuation gauge indicates that the stock market (S&P 500) is still about 25% above its fair market value. Short of some news about big productivity increases from AI, it will be difficult for stocks to climb much higher at these valuation levels.
I do not trade based on market valuation levels and you should not either. It is just a reminder that you need a strategy in place to protect your savings in case we experience a bear market. Older investors in particular need loss protection during stock market downturns.
My investing system comes with built-in loss protection. It is designed to avoid most of the losses in bear market meltdowns. But it also produces big gains in bull markets. You can now invest in my system directly from your brokerage account. Click on this link to get on my calendar to learn how to start using my Growth and Safety fund.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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