Why doing nothing is the hardest investment strategy of all

Emma’s UNICEF boat has settled into a respectable rhythm in the middle of the Clipper fleet, making its way toward Washington DC via the Panama Canal. Out there, intentionally disconnected from modern technology, she has very little idea what is happening in global markets, geopolitics, or the latest financial panic dominating headlines back home.

And it made me wonder something slightly uncomfortable.

Would Emma actually have been a better investor if she’d stayed here obsessively following the news?

Most investors instinctively answer yes.

More information feels like an advantage. We like to believe that by consuming more data, more analysis, more economic commentary, we improve our decision-making.

But there is a significant difference between being informed and being emotionally manipulated by information. And history tells us that the line between the two is far easier to cross than most of us would like to admit.

The modern investor now lives inside a permanent state of perceived crisis. Inflation spikes. Wars emerge. Central banks pivot. Elections threaten instability. Debt levels explode. Technology disrupts industries overnight.

And yet despite all this, global capital markets have continued to compound wealth remarkably effectively over long periods of time.

That contradiction is important because if markets had collapsed every time the headlines said they might, none of us would still be here.

Behavioural finance research repeatedly demonstrates what is really happening. Investors consistently overestimate the importance of recent events and dramatically underestimate the power of long-term compounding. Psychologists call this recency bias — our tendency to assume current conditions will persist far longer than they actually do. This bias becomes especially dangerous during periods of high uncertainty because emotionally charged information creates a false sense of urgency.

This creates one of the great tensions in investing: the behaviours that helped humans survive historically are often the exact behaviours that damage investment returns.

Think about the instincts that kick in during a market panic: selling feels rational, reducing risk feels prudent, and waiting for certainty feels responsible. And yet, historically, acting on each of those instincts has caused more damage than just sitting still.

Emma’s portfolio, assuming it remained invested in the same strategy, would likely achieve exactly the same return whether she was following every geopolitical headline or none of them.

That is profoundly counterintuitive because we assume investment success comes from reacting intelligently to events.

In reality, for most long-term investors, success comes far more from behaviour than prediction.

A Fidelity study reportedly found that some of the best-performing accounts belonged to deceased investors or those who had forgotten they even had accounts. Whether the study is accurately reported or not, the underlying behavioural principle is sound: investors who interfere less often achieve better outcomes because they avoid emotionally driven mistakes.

Looking back at client portfolios over decades is deeply humbling. When you examine real investment journeys since 2008 — through the financial crisis, Eurozone instability, Brexit, COVID, inflation spikes, wars, and endless headlines predicting disaster — what stands out is not the accuracy of anyone’s forecasts.

It is the astonishing resilience of capital markets themselves.

Companies adapted, profits grew, and patient investors were rewarded.

Understanding economic history and market structure matters enormously. But perhaps the role of information should be reframed.

Information should help us build robust long-term plans, not constantly tempt us to abandon them.

And maybe that is the real lesson from Emma sailing quietly across the ocean while the rest of us scroll anxiously through headlines.

The world has always felt uncertain, and every generation believes its crises are uniquely dangerous.

Perhaps sophisticated investing is not about knowing more than everyone else, but about developing the discipline to ignore far more of what does not matter.