Summary: "Dead" investors outperform living due to lower costs, taxes, and avoiding emotional decisions.

From CNBC: 2025-04-05 09:55:00

“Dead” investors who adopt a “buy and hold” strategy often outperform active traders due to lower costs and taxes. Human behavior poses the biggest threat to investor returns, as impulsive decisions lead to underperformance. Data shows that bad habits can significantly impact returns relative to a buy-and-hold approach.

Emotional impulses to sell during downturns or buy at peaks stem from human evolution. Market moves trigger a fight-or-flight response, leading to poor financial decisions. Behavioral mistakes can result in major losses, emphasizing the importance of a long-term, disciplined investment approach.

Investors should actively review asset allocation and periodically rebalance to align with goals. Automated funds like balanced and target-date funds can simplify the process and reduce the need for frequent transactions. Routine saving and investing, such as contributing to a 401(k), can help investors stay on track for long-term success.

Read more: Here’s why ‘dead’ investors outperform the living