Boring Beats Flashy in Investing
Sanjib Saha
17 May 2025
Trying to get rich quickly by jumping into the latest “hot” stocks or risky trends might seem exciting — but it’s rarely a winning strategy. In fact, research shows it usually backfires.
The tried-and-true path to building wealth is much less glamorous: spend less than you earn, and invest steadily in a low-cost, diversified portfolio. It’s not flashy, but it works — because time and compounding are on your side.
Still, it’s easy to get impatient. You hear about someone doubling their money in a biotech stock or tech sector, and suddenly a diversified stock fund feels… boring. This is where people fall into the trap of performance chasing — piling into whatever investment is currently soaring, or high-risk, concentrated investments.
But here’s the reality: higher returns come with higher risks — and those risks aren’t always visible until it’s too late. When risky investments are doing well, they feel safe. That illusion often leads investors to believe they’re smarter or bolder than they really are — right until the market turns.
Here’s the paradox: if an investment guaranteed higher returns, it wouldn’t be considered risky in the first place. What makes it risky is the real possibility of loss.
Why Some People Seem to Win Big
You’ll hear plenty of stories from people who struck gold with a speculative bet. What won’t you hear? The much larger group who lost money doing the same thing. This is called survivorship bias — we see the winners only and assume that anyone can be one.
In fact, studies often find that investor returns in volatile funds are often much lower than the funds’ own reported returns — simply because people tend to buy in after a fund has done well and sell after it crashes. Chasing performance doesn’t just underperform; it can destroy wealth.
So, Is Speculation Always Bad?
Not necessarily. It’s okay to take risks — but only with money one can afford to lose. If 90% of the portfolio is widely diversified, it might be fine to use the remaining 10% for the speculative and exciting investments. Just don’t mistake that for a long-term financial plan.
The Long-Term Consequences of Performance Chasing
- Very few lucky winners may strike it big, just like it happens in gambling or lottery. Most won’t. Furthermore, the fortune might evaporate when the efficient market finally nails the previously lucky speculator.
- Many investors lose serious money sooner or later, then either give up or eventually switch to safer strategies after damage is done. It’s a costly mistake.
- Some may get away with it and achieve similar return as a diversified portfolio but with a bumpier ride. It didn’t need to be this stressful.
- The most likely outcome for people choosing this approach is to quietly underperform the passive investors — and often not even realize it. They never compare their absolute or risk-adjusted return against any benchmark. They’d probably never realize that they missed the opportunity of a much better result with less drama.
A Note on Taking Big Risks
There’s one group for whom chasing big returns might make sense: people with so little to invest that a conventional path won’t meaningfully move the needle. For them, big risks are one of the few ways to try to change their financial future — similar to why many low-income individuals buy lottery tickets. It’s a very long shot, but the potential reward feels worth the risk.
For Everyone Else
If you’re fortunate enough to have steady income and the ability to save consistently, you don’t need to gamble to reach financial security. You’ve already won the most important part of the financial game: the ability to invest for the long term.
Stick with simple, low-cost, diversified investments. Let time and consistency do the heavy lifting. It may not sound exciting — but financial security never goes out of style.
This article is part of the Big Mistakes series