The investment management business is built around reasonable predictions about the future. The truth is, there is no reliable way to forecast short-term market action. Big gains and large losses occur rapidly and are rarely if ever accurately projected by market analysts.
Myth 1: Skilled analysts can predict gains and losses.
Almost every year the market corrects at some point between five and ten percent, and strategists announce they expected these corrections as if they were relying on propriety research when facts reveal a recurring occurrence in the normal course of the market. Having more than thirty years’ experience as a financial planner, I have learned to differentiate between predictions and reality, and have managed assets through countless market challenges.
Myth 2: Apply dollar cost averaging to windfalls.
Patterns indicate that most investing mistakes stem from psychological factors that a qualified Certified Financial Planner® can help investors avoid. In our practice we often help clients who receive a large sum of money from an inheritance, retirement account distribution, sale of a business or property, or even a lottery winning. The Wall Street Journal published How to Invest a Windfall (December 5, 2025) and included the findings of a recent study to confirm that if the funds are invested for the long-term, in this case twenty years or more, it was best to invest the funds immediately rather than dollar cost averaging; systematically investing the funds over time.
Of course, there are occasional years when dollar cost averaging would have produced better results, but even over one-year periods the market has been positive more than seventy-five percent of the time over the past one-hundred years.
Myth 3: Rebalance your portfolio regularly and often.
Another investing myth that plays to psychological factors rather than improving investment performance is that portfolios should be rebalanced on a regular basis. Perhaps surprisingly, some studies as reported in the Journal of Financial Planning during specific periods found that not rebalancing may have led to higher returns but with higher risk; results depend on timeframe, asset mix, and market conditions.
In practice, rather than exercising a regular rebalancing strategy, investors who own a portfolio of stocks may have been better off historically by allowing winning positions to run; future results may differ, and concentration increases risk. Investors in the leaders of the market including Alphabet, Amazon, Apple, Meta, Microsoft, and Nvidia would have far lower returns over the last decade if they rebalanced their portfolios quarterly to force sales of these great companies rather than fully profiting from their superior performance by remaining invested. Avoiding rebalancing does increase the risk of a portfolio, but the long-term performance has proven to be superior.
Risk averse investors would benefit from rebalancing as it does reduce risk and is a tradeoff some investors are willing to make. A variation in rebalancing includes unscheduled or opportunistic rebalancing and that can be beneficial to increase allocation to a sector that has been underweight and is likely to recover. Rebalancing by adding funds to underweight positions can also benefit those who are in the saving years of their careers.
Myth 4: Actively monitor your portfolio balances.
Today’s technology allows us to instantly know the value of a portfolio. As a result, too many investors check their values multiple times daily. The better strategy is to check infrequently and invest with a passive strategy either on your own or through an experienced advisor charging a reasonable fee.
Commentary by Vanguard, one of the largest asset managers, confirms that the more frequently investors check their balances, especially during down markets, the more likely they are to sell or change their long-term strategy compared with those who check their accounts less frequently. The myth that investors need to keep a close eye on their investments is clearly disproved with results markedly higher for those who avoided frequently checking as reported in the article, Don’t Look! Peeking at Your 401(k) Could Cost You, in the Wall Street Journal.
Myth 5: Learn market timing to improve gains.
Related to frequently checking portfolio values is the myth that successful investors learn to time the market. To improve gains, the market timer would need to first sell at the right time and then buy back at a lower level. It can occasionally work, but seldom can any investor time their decisions effectively and consistently. Very few can dedicate the time required for this to be worthwhile. Missing just a few large daily moves in the market can significantly reduce performance.
Myth 6: Trading more improves performance.
A similar myth is that trading more leads to better performance. Vanguard research has indicated in certain periods that accounts at their firm that made no changes outperformed those that made even small changes. Multiple studies shared in the Journal of Financial Planning confirm that portfolios that made frequent trades trailed those that passively bought and held their positions in long-term portfolios.
Myth 7: Bonds are safer long-term investments than stocks.
The myth that bonds are safe may be the biggest cause for concern. Safety from owning a bond comes from the return of principal when owning an individual bond of a highly rated company or the government. Owning a long-term bond from the United States or a highly rated company like Johnson & Johnson or Microsoft entails very low credit/default risk regarding return of principal when held to maturity, though bonds are not risk‑free and are subject to interest rate, inflation, and other risks as well as interest payments along the way. But the bond owner would have lost out due to inflation’s impact on the money. After ten years the bond’s proceeds can afford less than when the bond was purchased.
Additionally, owning bonds indirectly through bond funds offers no guarantee of returning the original principal, and this is on top of the risk of loss of purchasing power. Too often, money is improperly allocated to bonds without the owner’s full understanding of the total 
financial implication and risk.
Myth 8: Balance your portfolio with alternative investments.
A final investment myth to consider is that “alternative investments” should be included to round out your investment allocation. Alternative investments include various assets such as hedge funds, venture capital funds, non-traded real estate funds, private credit funds, cryptocurrencies, and metals. Most of these options have not been shown to improve long-term performance for investors, but can add to the cost of managing a portfolio.
The cost to manage a passive investment strategy has dropped so low that investment management firms are seeking new sources of revenue and sponsoring alternatives have been a path to their growth since they earn a much higher fee on those assets. Ironically, it may be better to own shares of the publicly traded alternative asset managers than to own one of their funds.
Confidence in the Fundamentals
Today’s investors need to consider so many factors in an extremely complex global economy. The good news is there are trained and experienced professionals who understand fundamental investment principles. Applying these principles has built wealth for countless individuals and families in our country for hundreds of years. At Cohen, we’re grateful for the opportunities to participate in this wealth building for our clients and their families.
