There’s a well-known study that Fidelity produced years ago that reviewed thousands of brokerage accounts and looked at the returns in each. The anecdotal conclusion: The best-performing accounts belonged to deceased account holders.
Right behind them were accounts belonging to people who had simply forgotten their passwords. I find that finding remarkable — and completely logical.
You can’t panic if you’re not paying attention
The thesis is simple. Investors who aren’t actively managing their accounts don’t panic-sell, don’t try to time the market and don’t interrupt their investments’ ability to compound.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Those combined factors tend to produce better returns than what more anxious, hands-on investors experience. The least-engaged accounts are effectively emotionless — no second-guessing when markets spike, no panic when they drop.
This tracks with what plays out in financial advising every day. Some clients want to be deeply involved in their portfolios — joining every call, making market calls of their own, flagging sectors they want to chase, constantly tinkering.
Others barely discuss their investments at check-ins, admit they haven’t looked at their accounts in months and place full trust in their plans.
Categorically, the highly engaged, informed, opinionated investors tend to fare worse than the ones who stay mostly hands-off.
Markets go up and down — reliably
Detaching from day-to-day market noise can be a genuinely effective strategy for many investors. It keeps emotion — and the fight-or-flight instincts that come with it — out of the decision-making process.
It’s tempting to make market calls or share strong opinions about the economy. The markets, unfortunately, aren’t listening. They don’t care about anyone’s fears, predictions or analysis. They largely just do what they’ve always done, and they do it fairly predictably.
What does “predictably” mean here? Markets have historically averaged roughly 10% annual returns and have been up in about three out of every four calendar years. That’s simply the pattern.
Knowing that in advance, a down year shouldn’t come as a shock. Nor should the fact that some pullback happens during nearly every calendar year, even the good ones — that’s the norm, not the exception.
There’s no getting around it: Investing in the markets means living with volatility. The real question is how an investor responds to it.
The realistic middle ground
Being completely detached from an investment plan isn’t the right answer either. It makes sense to keep some pulse on a portfolio, but for most people, an arm’s-length relationship works best.
That might mean placing trust in a professional or building enough personal discipline to avoid constant tinkering.
The goal isn’t to ignore the markets entirely — it’s to stop reacting to every headline or talking head on a financial news show.
What matters more is staying allocated in a way that’s aligned with long-term goals. Changes should be occasional, not reactive, grounded in research and represent a strategic shift worth committing to for an extended period.
Above all, an investor should be comfortable enough with the plan to stick with it through every kind of market.
Why this matters more in retirement
This dynamic becomes more important once someone shifts from saving to spending down a portfolio. During accumulation years, a rough patch in the market can often be corrected by continuing to contribute and letting time do the work.
In retirement, that safety net disappears. A retiree reacting emotionally to a downturn — selling at the wrong moment, abandoning a withdrawal strategy, chasing yield into something unfamiliar — can do lasting damage to a plan that took decades to build.
The retirees who tend to do best are often the ones who set an allocation aligned with their income needs, then largely leave it alone.
No one has to be dead to earn great long-term returns, but acting a bit more like it — staying invested, resisting the urge to tinker and tuning out short-term noise — might be the closest thing to a reliable strategy that exists.