You look at the headlines, and the stock market seems to be setting new records every other week. Yet, when you log into your brokerage account, your balances tell a different story. It’s a frustrating feeling.
If the market is up but your wealth isn’t following suit, you might be tempted to blame the economy, your financial advisor, or just plain bad luck. I’ve been investing in the stock market for 45 years, so you can trust me when I tell you: If you’re not making money in stocks, especially over the long term, it’s you that’s likely the problem.
According to the research firm DALBAR, the average equity fund investor earned just 16.54% in 2024, compared to the S&P 500’s massive 25.05% return. That’s a brutal 8.51% gap, representing the second-largest investor performance shortfall in a decade.
It wasn’t the market that held investors back last year. It was their own behavior.
Here’s why you aren’t making the money you should be — and how to fix it.
1. You try to time the market
You think you can outsmart the market by selling at the top and buying at the absolute bottom. The reality is that almost nobody can do this consistently, not even the professionals on Wall Street.
When you pull your money out waiting for a crash, you miss the unexpected rallies. The stock market’s best days often happen within days of its worst. If you sit on cash waiting for the perfect moment to jump in, you practically guarantee you’ll miss out on the biggest gains.
Related: See “Freaking Out About the Stock Market? Read This.”
2. You consume too much financial news
Financial media exists to keep you watching, reading, and clicking. They do this by making every economic hiccup sound like an impending catastrophe.
If you react to every terrifying news alert by adjusting your portfolio, you’re going to bleed money through mistimed moves and tax hits.
Good investing is incredibly boring. Stop checking your account every single day.
3. You follow the herd
Whether it’s the latest meme stock, a hyped cryptocurrency, or an artificial intelligence company everyone is suddenly talking about, buying what’s popular usually means you’re buying at the absolute peak.
By the time your neighbor or your favorite social media influencer is bragging about their massive returns, the easy money has already been made. Stop taking investment cues from the crowd.
The way I’ve made the most money in the market is to buy when others are selling. When everyone is thinking things can’t possibly get worse, they’re about to get better. And vice versa.
Here’s an expression I’ve used often over the years: “Unless you think the economy is going to zero, buy stocks when nobody else is.”
That’s how fortunes are made. Or at least, that’s how much of mine was.
4. You let fear dictate your choices
It hurts to watch your portfolio drop. Humans feel the pain of losing money much more intensely than the joy of making it.
When the market inevitably dips, fear takes over, and people sell their investments at a steep loss just to make the anxiety stop. Doing this locks in your losses permanently.
You have to learn to stomach the downturns if you want to capture the long-term rewards. Here’s another expression I coined as an investment advisor: “If you’re freaking out when stocks go down, you’ve got too much money in the market.”
5. You tinker way too much
A portfolio is like a bar of soap. The more you handle it, the smaller it gets.
If you’re constantly swapping funds, attempting to optimize your setup, and manually picking individual stocks because you’re bored, you’re doing too much. Pick a simple, diversified strategy, automate your contributions, and then walk away. (See “The 10 Golden Rules of Becoming a Millionaire.”)
When I worked as a stockbroker, I rarely made money, largely because of the things listed in this article. I traded too much, took too many flyers, followed dumb advice and watched way too much financial news.
When I quit my job as a financial advisor and started doing financial journalism, I learned to ignore the noise, not to invest so much that I panicked, to buy only quality companies and to hold them for long periods of time.
That’s a strategy that has served me well. It will work for you, too.
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