From Kiplinger · · 1m 10s
Playing Dead for Better Returns
Investors who stop reacting to market noise earn higher returns by staying hands-off.
In brief
Investors who stop reacting to market noise earn higher returns by staying hands-off. Investors who avoid panic-selling and emotional reactions to market volatility achieve better long-term returns than active traders. Originally reported by Kiplinger.
Fidelity Study Finds
A Fidelity study reviewed thousands of brokerage accounts and found the best-performing accounts belonged to deceased account holders.
“The best-performing accounts belonged to deceased account holders.”
Why Deceased Accounts Excel
Deceased accounts outperformed accounts where people forgot passwords, showing the benefits of not actively managing investments.
“The best-performing accounts belonged to people who had simply forgotten their passwords.”
No Panic-Selling
Investors who don't panic-sell or time the market avoid emotional reactions that hurt long-term returns.
“The least-engaged accounts are effectively emotionless — no second-guessing when markets spike, no panic when they drop.”
Market Predictability
Markets have historically averaged 10% annual returns and been up in three out of every four calendar years.
“Markets have historically averaged roughly 10% annual returns and have been up in about three out of every four calendar years.”
Emotional Trading Hurts
Active investors who constantly tweak portfolios often underperform passive investors who stay hands-off.
“Categorically, the highly engaged, informed, opinionated investors tend to fare worse than the ones who stay mostly hands-off.”
Retirement Risk
Retirees reacting emotionally to market downturns can damage long-term portfolios by selling at the wrong time.
“A retiree reacting emotionally to a downturn — selling at the wrong moment, abandoning a withdrawal strategy, chasing yield into something unfamiliar — can do lasting damage to a plan that took decades to build.”
Passive Investing Works
Investors who stay invested and avoid short-term noise achieve better returns than those who react to market fluctuations.
“No one has to be dead to earn great long-term returns, but acting a bit more like it — staying invested, resisting the urge to tinker and tuning out short-term noise — might be the closest thing to a reliable strategy that exists.”
What Matters Most
Long-term returns depend on staying aligned with goals, not reacting to market headlines or financial news.
“The goal isn't to ignore the markets entirely — it's to stop reacting to every headline or talking head on a financial news show.”
The big picture
Investors who avoid panic-selling and emotional reactions to market volatility achieve better long-term returns than active traders.
