After more than 30 years of guiding families through their investment journeys, we’ve noticed that some of the most persistent challenges investors face aren’t market-related—they are mindset-related. Today, we want to address some common misconceptions about portfolio performance that can derail even the most well-intentioned investment plans.
The Comparison Trap: Your Portfolio vs. “The Market”
One of the most frequent questions we hear is: “Why isn’t my portfolio keeping up with the market?” This question reveals a fundamental misunderstanding about how diversified portfolios work and how this is like comparing apples and oranges.
For example, when you say “the market,” it’s possible you mean the S&P 500, which represents just one slice of the investment universe—large U.S. companies. A well-diversified portfolio typically includes small-cap stocks, international stocks, bonds, and other asset classes that provide crucial diversification benefits. These components won’t always move in lockstep with large U.S. stocks, and that’s by design to help reduce concentration risk to one sector, company, market capitalization, or geography.
The “Beat the Market” Myth
Popular financial media perpetuates the notion that you must “beat the market” to build wealth. This creates unnecessary pressure and often leads to poor decision-making and potential tax implications.
According to the SPIVA® U.S. Scorecard published annually, 65% of all active large-cap US equity fund managers underperformed the S&P500 benchmark in 2024, and this becomes more pronounced over longer periods of time1. If professional money managers – who have teams of analysts and sophisticated research tools – struggle to consistently beat market benchmarks, what makes individual investors think they can?
You don’t need to beat the market to achieve financial independence. Meaningful market returns can be captured through low-cost and tax-efficient, diversified investments which can build wealth over time.
Volatility: Your Frenemy
Market volatility triggers our fight-or-flight instincts, but it’s actually a normal—and necessary—part of investing. Since 1980, the S&P 500 has experienced an intra-year decline each year, yet 34 out of 45 years ended with positive returns at year end.2
Volatility creates opportunities for long-term investors. It allows you to purchase shares at lower prices during downturns and benefits your portfolio when markets recover. Without volatility, there would be no risk premium—the extra return you receive for taking on investment risk.
Volatility is not your enemy—it’s simply a natural byproduct of investing. Accept it, plan for it, but don’t let it derail your strategy.
Moving Forward with Confidence
Building wealth through investing isn’t about finding secret strategies or beating the market. It’s about understanding how markets work, accepting reasonable levels of risk, and staying disciplined over time.
Your portfolio should be designed to help you sleep well at night while working toward your long-term financial goals. If market volatility keeps you awake or if you find yourself constantly second-guessing your investment decisions, it may be time to reassess whether your strategy truly aligns with your risk tolerance and timeline.
Focus on what you can control—costs, diversification, and staying the course—rather than trying to predict the unpredictable or things outside of your control.
1 https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2024.pdf
2 J.P. Morgan’s “Guide to the Markets”, slide 16, https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/
Take Action:
Start Early and Invest Consistently. Time is your greatest ally in building wealth. The earlier you start, the more compound growth works in your favor. Also, investing regularly through dollar-cost averaging helps smooth out market volatility and removes emotion from the investment process.
Keep Costs Low. Every dollar paid in fees is a dollar that can’t compound for your benefit. Focus on low-cost index funds and tax-efficient strategies.
Diversify Broadly. Don’t put all your eggs in one basket. Spread your investments across different asset classes, sectors, and geographies to reduce risk while capturing market returns.