Investing Intuition vs. Evidence

If you’ve been following the news around the stock market in the last few weeks then you might be feeling a little nervous. No news is good news, as the saying goes, and the markets have been down and up and up and down, and generally feeling a bit tenuous.

Now, I actually like paying attention to the stock market. It’s interesting to me. I’m not glued to it all day long, but I check the markets a few times a day just to know what’s going on. But the honest truth is that most people would probably be better investors if they only checked on their investments occasionally, perhaps even just once or twice per year. That’s because the more you zoom in, the crazier it all feels. If you look at your investment accounts every 6 or 12 months, then things probably feel kind of normal. But if you check in every day, it can feel chaotic and all over the place. And, even though it’s interesting to me, that kind of volatility is just too stressful for most people.

Longtime readers will remember that a post called “What The Hell Is Going On (And What Should I Do)?” I wrote that one while the markets were going crazy over the stupid Liberation Day tariffs, and I shared a few ideas about how to be a better investor when it feels like the shit is hitting the fan. And guess what? All of that craziness that had the financial news running in circles last April now just feels like another thing that happened. It doesn’t feel like that big a deal almost 11 ½ months later because after that the market went on to do pretty darn well in 2025. The S&P 500 was up over 17%, which is way above historical averages.

And there are lessons to be learned from that. One of the biggest ones is that making investment decisions based on intuition – in other words, how you feel and what you think might happen next – is not always the best for your financial life. Intuition would have told you last April that we were in for a lousy year as investors. But that’s not what happened.

If you had instead ignored that feeling that things were bad and getting worse and looked at the long-term evidence of how the stock market tends to perform over time, then you would have concluded that the best move was to just keep doing what you’ve been doing and not worry that much about day-to-day volatility. So if you were one of those brave people who stuck to your plan when other people got scared and sold their investments, then last year was probably pretty good for you. And, even though I have absolutely no idea what will happen in the stock market this year (and by the way, nobody anywhere knows what will happen in the stock market this year), the evidence tells us that continuing to invest will pay off over many years and decades.

Today I want to share four examples of how looking at the evidence for what works and what doesn’t has shaped my own investing beliefs and habits and strategies. Now, I don’t have some unique insight that makes me better or smarter or more prepared than anyone else. Everything I know about investing is available for free on the internet right now. Instead, my greatest strength as an investor is to look at the evidence and then make decisions that line up with that.

1. The best time is the worst time

2. Take timing out of your decisions

3. Let time do the heavy lifting for you

4. Don’t worry about the investments that don’t work out

As always, I hope that sharing stories from my journey can help you become a better investor. Of course, if what I’m saying resonates with you and you think, “gosh, I’d better talk to Tim about all of this stuff,” then I would be happy to have that conversation.

And, as I mentioned a few weeks ago, I’ve been considering making a follow-along investing newsletter.  It’s still taking shape, but my vision is that you would see in real time how I invest my own money every month and how those investments perform, whether good, bad, or ugly. This will be purely for educational purposes and not investment advice, but I think there is an opportunity to learn more about investing by watching how someone else does it. If you’re interested in learning more, please visit this page.

Ok, here are actual, real life examples of how I’ve used evidence rather than intuition in my own investing habits and strategies.

The best time is the worst time

Let’s start with a simple example that I’m going to call “the best time is the worst time”. 

It feels best & most exciting to invest when the markets seem to just go up and up and up. You invest some money, a month later it’s more money, and that feels really good. So, when markets are going up, people tend to get excited and buy more investments. But when the markets are dropping, it feels like a risky time to invest. When you check in on your investments and the number goes down, it feels really bad. Consequently, people tend to panic and sell investments when the markets drop. In both of those examples, intuition is in the driver’s seat. You’re doing what it feels like you should do, but that’s not necessarily the same as what you actually should do. 

Remember that old adage “buy low, sell high”. It’s a pretty straightforward concept, right? You want to buy at one price and someday in the future sell at a higher price. As simple as that is, our intuition moves in complete opposition to that basic concept. The instinct – or what feels right – is to buy as the markets are going up and then sell as the markets are going down. But that’s effectively buying high and selling low, which is exactly the opposite of what you want to do. Many, many people have been burned by this and decided that investing just isn’t for them.

But I want you to be a better investor than that. I want you to make decisions that align with the evidence. And the evidence tells us that the best time to buy is when it actually feels the worst. It’s not intuitive, but it’s true. When everyone else is scared and running for the exit, that’s when a patient investor with a consistent process can really shine. 

If you had bought an S&P 500 index fund during the drop the day after stupid Liberation Day – not at the very bottom, which would have been hard to anticipate, but just the next day – that investment would now be up around 25% as of this recording. If you had instead waited to invest until the markets recovered and it felt safe, that investment would be up around 19%. That’s still pretty good, but all of that panic selling that caused the markets to drop was a great opportunity to pick up better than average returns. 

And if you had decided to just hold your ground and do absolutely nothing, then you only would have had to wait about 5 weeks to be right back to where you were before all of that panic.

So my first evidence-based tip is that the best time to invest is when it feels the worst.

Take timing out of your decisions

If buying when everyone else is selling is a little too much for your nervous system to handle, a close runner up is to just stick to your plan regardless of what is happening in the markets. Forget about trying to time the markets and just take timing completely out of your decisions.

What do we mean by “timing the market”? Well, that’s some investor jargon that means you try to anticipate whether the stock market is going to go up or down and then make decisions accordingly. Here’s the thinking: if you knew that the market was about to drop, you could sell investments now and lock in gains. Or if you knew the market was about to go up, you could buy more now and get extra growth. That’s what we mean by timing the market.

But the truth is that no one anywhere is actually any good at anticipating whether the market will go up or down today, this month, this quarter, or this year. There’s absolutely no evidence to support the idea that you or I or anyone else can successfully do that – but there are still lots of people who try.

Here’s what the evidence does tell us: if you missed even just the 10 best days in the stock market over the last twenty years, you would end up with significantly less than if you had just stayed invested the whole time. Just do a search for “what if you miss the 10 best days” and you’ll see lots and lots of articles and charts that support that. Depending on which source you like, missing just those 10 best days over the last 20 years would have cost you on average about 2.9-4.3% per year. That is a huge downside considering that the odds of correctly guessing which of those 10 days over two decades would be the good ones works out to be around 0.14% –  a little better than 1 in 1,000, but not much.

And what you’ll notice in those articles is that those 10 best days always happened in the middle of chaotic and confusing events, often really close to the 10 worst days. In the last 20 years, all ten of the best days for the stock market happened during the 2008–09 financial crisis or the fallout from COVID 19. So the odds are just tremendously against you successfully avoiding the worst days while simultaneously participating in the best days. The evidence doesn’t support it.

So what should you do instead? Well, first things first, don’t sell investments because you think the market is about to drop. Again, the odds are tremendously against you getting that right, and being off by just one or two days has big negative consequences.

One super easy technique that anyone can do to take timing out of investment decisions is to automate your investing so that you buy the same dollar amount of the same investments every week or every month. This is called Dollar Cost Averaging, and here’s how it works:

Let’s say you automate a transfer of $100 per week into your investment account and you use it to buy exactly the same thing every single week. When prices go up, that means your $100 will buy less of those investments. Right? You only have so much money, so if the stuff is more expensive, that means you buy less of it. When prices go down, on the other hand, your $100 buys more of those investments. Does that make sense? Over time, Dollar Cost Averaging can help you pay less per share because you buy more when it’s cheap and less when it’s expensive. And, because it’s automated, you’re removing whatever emotions or intuition you have about what the markets might do next.

And, by the way, you don’t need to have a ton of money to do this. With all the modern tools at our disposal, you could invest with as little as $5 or $10 a week. This is something that I try to always do with my own money, though admittedly at times I’ve had to pause or adjust the amount of my automated contributions based on ups & downs in cash flow. So just do whatever you can manage and don’t let limited cash flow stop you from consistently adding to your investment accounts.

Another good idea is to base your buying & selling decisions on things that have nothing to do with the news or what the stock market is doing right now. For example, around this time of year most people are working on their tax returns and many are deciding to shove some extra money into their IRAs before the filing deadline. That decision has nothing to do with timing the market, because the market generally doesn’t care all that much about when you file taxes.

Let time do the heavy lifting for you

So the evidence shows that timing the market doesn’t really work. But here’s the good news: it doesn’t matter. You can let time do all of the heavy lifting for you.

Over any given year in the past 100ish years, the U.S. stock market has been positive about 69% of the time. So even if we don’t know what the stock market will do this year, the odds are in your favor. If we zoom out to any given 5 year period, the stock market has been positive about 79% of the time. In other words, your odds of making money in the stock market are about 10% higher if you can just wait five years. Over 10 year periods, the U.S. stock market was up about 88% of the time, And there has never been a 20-year period where the U.S. stock market was negative. 

Now, that doesn’t mean that it can’t ever happen, because things that have never happened actually happen fairly often. But the point is that investing has this really weird tendency to perform better the longer you stick with it. On any given day it might feel like a roll of the dice, but over longer periods of time it actually becomes really predictable. That’s what the evidence supports, and so we can all become better investors by simply staying invested for a really long time.

And that’s great for us, because that means that time can do all of the heavy lifting for you. The stock market tends to do well over long periods of time, so just sit back and let it. 

And then there’s compounding. You might have heard me talk about this before, but humans evolved to be really good at linear decision making. For example, am I running fast enough to catch my dinner or to avoid being someone else’s dinner is a linear calculation. Extra effort directly translates to results really quickly. But our brains did not evolve to be great with exponential calculations, which is how compounding works.

Let me give you a quick example to demonstrate the power of compounding growth without throwing a ton of math at you. Let’s say that you invest $100 today in a low-cost stock market index fund. The stock market returns on average about 9-11% per year, depending on who you ask, so let’s split the difference and say that the average return is 10%. At that rate, your money should double about every 7.2 years. 

So in 7.2 years, your $100 should have turned into around $200. But now a 10% annual gain on that $200 – which works out to $20 – represents a 20% gain on your initial $100 investment. In other words, even though the stock market still averages about 10% per year, the rate of return on your original investment actually increases. Isn’t that weird? Let’s say another 7.2 years go by and your money doubles again to $400. Now a 10% annual return – or $40 – represents a 40% gain on that original $100. The rate of growth gets even faster. 

Plus the growth from all the years in between also continues to grow. So the money you made in year two has also been growing this whole time, so has the money you made in year three, and so on and so on. This is how exponential growth works: the longer you hold your investments, the more your growth accelerates. Even average returns end up having a really big impact if you hold your investments for a really long time. 

Let me say that again: the best and easiest way to be a really great investor is to buy things you can own for a really long time and then own them for a really long time. That’s what the evidence tells us, so that’s what I do with my own money. And if you take nothing else away from this episode, I want you to remember that every investor’s super power is simply staying invested for a really long time and letting time do the heavy lifting for you.

Don’t worry about the investments that don’t work out

The last thing I want to talk about today is really hard to do – maybe the hardest of anything I’ve said so far – but the evidence backs this up: don’t worry about the investments that don’t work out. Seriously, don’t worry about it.

Another trait of human evolution is that we feel the impact of loss about twice as much as the joy of gain. And that’s because for most of human history, we didn’t have things like super markets and refrigerators. Having enough food for your family or tribe or community was a very good thing, but beyond what you could eat or carry there was limited upside to having more. What good is more meat or produce or grain if it rots before you can eat it? On the flipside, losing the food you already have or your shelter or your place in the community could literally be life or death. So we evolved to prioritize avoiding loss over pursuing extra gain and that means we just feel loss so much more than we enjoy gain.

Fast forward to today and the way this translates to investing is that it feels really, really bad to watch the value of your investments drop. It sucks, and I’m not going to pretend that it doesn’t. Even if you know that timing the market is bullshit, even if you know that time is on your side, it feels much worse to experience a drop in your investment account than whatever mild satisfaction you get when it goes up.

But the math and the statistics are on your side. Because the most you can lose with any investment is 100%. It doesn’t happen often, but your investment could go to zero. But the most you can gain is theoretically unlimited. That’s hard to wrap your head around, but it’s true.

I just mentioned a minute ago about how the stock market tends to double about every 7.2 years. So let’s say you buy two investments at $100 each; one is a low-cost stock market index fund and the other is a hot new company that has been growing like crazy.

And let’s say that 7.2 years go by and that hot new growth company has completely fizzled out and gone to zero. You lost your $100 and that feels terrible. But that index fund has been quietly chugging away, averaging about 10% per year, and is now worth $200. So you’re basically back to even. But let’s say you remembered my advice to let time do the work for you and after another 7.2 years it doubles again. And you keep waiting and it doubles again, and then again. So even though that one investment lost 100%, the boring index fund would now be up around 1,500%.

In other words, as long as enough of your investments do about average, the gains from your winners will completely erase the loss from your losers. 

And the dirty secret in investing is that this happens to everyone. The hotshot investors you see on television or read about in the newspaper have all had big, embarrassing disappointments. All of them. It’s not a flaw of the system; it’s part of the system. Warren Buffett, who is probably the most famous living American investor, has said that he would have been more successful if he’d never sold a single investment, and that includes all of the duds. Now, he’s already plenty rich, he’s not really missing out on anything, but the point is that letting even his worst investments dwindle down to nothing would have been a totally fine idea.

And the math completely backs that up.

So my final recommendation for today is more about mindset than tactics, but the evidence suggests that every investor will have the occasional bad investment that doesn't go anywhere or maybe go completely to zero – and that’s ok. Because as long as you do just all right with most of your investments, those occasional losses will be eclipsed by the power of compounding growth.

Ok, that’s it for today. If this kind of stuff is interesting to you, drop me a line. I honestly love thinking and talking about investing, especially the mindset and habit building part, so I’d be happy to hear from you.

And if you’re interested in learning more about that follow-along newsletter as it evolves, please click here.

Thanks,

Timothy Iseler, CFP®

Founder & Lead Advisor

Iseler Financial, LLC | Durham NC | (919) 666-7604

Iseler Financial helps creative professionals remove stress while taking control of their financial lives. We'll help identify current your strengths and weaknesses, clarify and refine your long-term goals, and prioritize decisions to improve your financial well-being now and later. Reach out today to take the first step.