Most investors are not undone by complicated decisions. They are undone by widely held beliefs that sound sensible but do not hold up under scrutiny.
In Episode 76 of The Purposeful Investor, we sat down with Apollo Lupescu from Dimensional Fund Advisors to work through 10 of the most persistent myths in investing. Apollo has spent decades studying market behaviour and communicating it to investors around the world. His perspective is grounded in evidence, not opinion.
If you have ever held cash because it felt safe, avoided international shares because they seemed too risky, or sold investments when headlines turned negative, this article is for you.
Key Takeaways
- Most investing mistakes are driven by emotion or misinformation, not complexity
- Past performance, especially short-term past performance, is not a reliable guide to future results
- The goal of investing is not to beat the market. It is to stay on track toward your own financial goals
- Holding cash over the long term is not safe. Inflation steadily erodes purchasing power
- Market timing rarely works because you need two consecutive correct decisions: when to get out, and when to get back in
- Australia makes up roughly 2 per cent of the global share market. Limiting your portfolio to Australian assets means missing the other 98 per cent
- Passive investing in Australia has consistently outperformed most active managers after fees over the long term
- Diversification, owning a broad range of companies across markets, is the most reliable way to capture returns without concentrating risk in any single bet
The 10 Myths at a Glance
| # | The Myth | The Reality |
| 1 | Past performance predicts future results | Short-term trends rarely continue and often reverse |
| 2 | You must beat the market to succeed | Meeting your goals is success. Benchmark comparison is a distraction |
| 3 | Cash is a safe long-term strategy | Inflation steadily erodes the purchasing power of cash |
| 4 | You need to time the market | No one has done it consistently. The odds are not in your favour |
| 5 | Higher risk always means higher returns | Only certain risks come with a return premium. Others just hurt you |
| 6 | Active stock picking beats the market | Most active managers underperform after fees, most of the time |
| 7 | International investing is too risky | You are investing in companies, not countries |
| 8 | Run for cover when markets get volatile | Volatility is often the best opportunity to buy quality at lower prices |
| 9 | Financial news helps you make better decisions | Financial news is entertainment. It is not investment advice |
| 10 | You must back the next big trend | Diversification means you already own the next big thing |
Myth 1: Past Performance Predicts Future Results
When an asset class has performed well recently, it attracts attention and new money. Gold, technology stocks and AI have each had moments where strong recent performance drew in investors expecting those returns to continue. It is human nature. Nobody wants to miss out.
Apollo draws on the history of gold to illustrate why this instinct is a trap. After a fivefold rise in the mid-1970s, gold spent roughly 20 to 25 years below that peak before recovering. A similar pattern followed the global financial crisis. Each time, investors who bought based on recent performance arrived late and waited years for their money to return.
The same pattern applies to share markets. Over the past decade, a small group of large US technology companies dramatically outperformed the broader S&P 500. Past performance of that magnitude is not a forecast. It is a description of what already happened.
The rule is not that winners become losers. It is that concentrating an investment decision on what happened recently, whether over one year, five years or even ten, is not sufficient evidence for what will happen next.
Myth 2: You Must Beat the Market to Succeed
This myth starts with how financial institutions often position their services: invest with us, and we will help you beat the market.
Apollo’s response is direct. Success in investing is not defined by outperforming a benchmark. It is defined by staying on track toward your own goals. If the market falls but your portfolio is built with enough resilience and reserves to keep you on course, that is a successful investment experience.
David reflects on the global financial crisis. Across a period of extreme disruption, most Capital Partners clients remained on track to achieve their goals. Not because the market cooperated, but because their plans were built to withstand volatility. The goal was never to beat the index. It was to get where they needed to go.
Apollo uses the analogy of a tank versus an early biplane. You do not want a structure where one broken wire brings the whole thing down. A well-constructed portfolio is built to push through market cycles, not to perform in ideal conditions only.
The first step in any investment plan is to define what success actually means for you: what you are investing for, when you will need the money, and how much you need. Everything else follows from that.
Myth 3: Cash Is a Safe Long-Term Strategy
Cash feels safe. The number in your account does not move. Nothing appears to be at risk.
The problem is what happens to everything else while the cash sits still. Groceries, petrol, property and healthcare all rise in price over time. Cash does not grow to keep pace. Every year you hold cash, your ability to buy the same things quietly diminishes. That is inflation.
Aden makes the point tangibly. A meat pie that cost $3 in his childhood now costs $7.50 or $8. The pie has not changed. The purchasing power of the cash has.
Short-term cash holdings for liquidity needs are entirely sensible. But long-term investing in Australia with a large allocation to cash is not a defensive strategy. It is a slow erosion of wealth.
Myth 4: You Need to Time the Market
Market timing sounds logical. If you can get out before a fall and get back in before a recovery, you protect your capital and capture the upside.
The problem is that it requires two consecutive correct decisions, not one. Apollo puts it plainly: when you decide to sell, there is an equally important decision that follows: when do you get back in? Nobody has managed to make both of those calls consistently over time.
The statistics also work against market timers. Looking at approximately 50 years of historical market data, the pattern is consistent: the shorter the timeframe, the closer the outcome is to a coin flip. The longer the timeframe, the more decisively markets have tilted positive.
| Timeframe | Historical pattern |
| Daily (trading days) | Roughly a coin flip — slightly more positive than negative |
| Quarterly | More positive than negative — a clear historical majority |
| Annually | Strongly tilted positive — negative years have been the exception, not the rule |
Source: DFA research.
At a daily level, it is close to a coin flip. If you leave the market for a quarter, you are more likely to miss a positive quarter than avoid a negative one. The annual picture is even more decisive.
Apollo makes this concrete with a comparison to Roger Federer’s career statistics. Federer won approximately 54 per cent of the points he played. The world’s best male tennis player lost almost half the points he played. But give him a full set, and he won roughly 75 per cent of sets. A full match, he won approximately 81 per cent of his career matches.
Long term investing works on the same principle. The more time you give the market to run, the better the odds become. Getting out because of a difficult quarter is the equivalent of leaving the Federer match at the worst possible moment.
Myth 5: Higher Risk Always Means Higher Returns
There is a relationship between risk and expected return. But the myth is that taking any risk automatically earns a higher return.
Apollo draws a useful distinction between paid and unpaid risks. In American football, players are paid to put their bodies on the line, and they wear protective equipment accordingly. If a player decided to take the field without a helmet, nobody would pay them extra for it. They would simply be absorbing an unpaid risk.
In investing, the equivalent includes concentration risk, liquidity risk in private markets, and operational risk in unregulated assets. These are risks for which there is no reliable return premium.
Public markets versus private markets
As private equity and private credit have grown in prominence, more investors are considering them alongside traditional public stocks and bonds. Apollo argues that the more important comparison is not headline returns, but structural features:
| Feature | Public markets (stocks and bonds) | Private markets (private equity and credit) |
| Regulation | High (governed by ASIC and international equivalents) | Low to minimal in many jurisdictions |
| Transparency | High (required reporting and disclosure) | Limited (private businesses are not required to disclose much) |
| Liquidity | High (most positions can be sold within a day) | Low (capital is often locked up for years) |
| Price discovery | Strong (millions of daily transactions) | Weak (you may be transacting with one party that holds more information than you) |
Private equity and private credit may suit large institutional investors such as endowments or pension funds with very long-term and predictable liabilities. For individual investors whose cash needs change over time, the structural weaknesses listed above carry real risk that headline return figures do not always capture.
Myth 6: Active Stock Picking Beats the Market
In the Australian share market, more than 80 per cent of active fund managers failed to beat the S&P/ASX 200 after fees over five years, and approximately 87 per cent failed over ten years, according to the S&P SPIVA Australia Scorecard. The pattern is consistent across markets and over longer timeframes.
Apollo explains why underperformance is the norm, not the exception. Active management is expensive. The proposition of hiring someone to select stocks on your behalf requires paying them a fee. If that fee is justified by genuine outperformance, the maths works. But the accumulated evidence, across decades and across markets, shows that most active managers do not outperform consistently after fees.
The question becomes: why pay a premium for something that, on balance, delivers worse outcomes than a passive investing approach?
Passive investing in Australia, through index funds or structured factor-based funds, gives investors broad market exposure at low cost. Apollo makes clear that this does not mean passive is always the only approach. But the evidence strongly supports broad, diversified, low-cost index fund investing as the foundation of long-term wealth building for most investors.
The incentive structure drives the myth. Active management fees depend on the perception that someone can identify winning stocks. The marketing behind that perception is powerful. The data behind it is not.
Myth 7: International Investing Is Too Risky
Australia makes up approximately 2 per cent of the value of all publicly traded companies in the world. The United States represents approximately 65 per cent, with around 3,000 listed companies. The remaining 40 or so major stock exchanges add another 10,000 companies.
An investor who restricts their portfolio to Australia is limiting their opportunity set to 2 per cent of what is available.
Apollo reframes the question in a way that cuts through the anxiety around international markets. You are not investing in countries. You are investing in companies.
Look around most Australian offices and homes. iPhones, Samsung devices, Dell computers, Microsoft software, Toyota and BMW vehicles. These are not Australian companies. Consider car ownership alone: BMW, Mercedes, Porsche and Volkswagen are German. Toyota is Japanese. Land Rover and Jaguar are now owned by an Indian company. Volvo by a Chinese company. These brands are part of daily life in Australia, yet they sit outside the ASX entirely.
A portfolio that excludes international companies is not avoiding risk. It is avoiding participation in where most of the world’s innovation and growth occurs.
David observes the same thing in the Capital Partners office: iPhones, Samsung phones, Dell and HP hardware, Microsoft on every computer, cybersecurity software from global providers. If the investment opportunity set were limited to Australia, all of that would be missing.
Is it riskier to own Toyota alongside BHP, or to own only BHP? The case for international exposure in a long-term investing portfolio is not that overseas markets are safer. It is that concentrating in a single 2 per cent slice of the global market carries its own form of concentration risk.
Myth 8: Run for Cover When Markets Get Volatile
Market volatility triggers a deep, instinctive response. Apollo describes it as the same physiological reaction that helped our ancestors survive physical danger. The instinct to protect yourself from a threat is not irrational. It is just poorly suited to investment decisions.
When markets fall, prices are lower. That is a fact, not a threat. David draws on a comparison most Australians recognise. During Black Friday sales, consumers actively seek out discounts and spend billions of dollars specifically because prices have fallen. Nobody avoids a sale because something is cheaper. They move toward it.
Markets work the same way. When prices fall across the board, quality assets are available at a discount. Investors who sell during volatility do the opposite of what rational purchasing behaviour would suggest: they sell low, then typically buy back in after prices have recovered, paying more.
The most successful long-term investors have built their records in large part by remaining willing to buy when others are selling. Warren Buffett’s decision to buy into Goldman Sachs during the global financial crisis is one well-documented example. That is not sophisticated market analysis. It is a willingness to override the instinct to run.
Myth 9: Financial News Helps You Make Better Investment Decisions
This is, in Apollo’s view, one of the most damaging myths in modern investing. And one of the most difficult to address, because financial media can feel authoritative.
The issue is incentives. A financial publication or broadcast needs advertising revenue. Advertising revenue requires audience. Audience requires emotional engagement. The most reliable way to generate engagement is to trigger either greed or fear.
“Bloodbath in markets.” “The stocks you must own this year.” “Is the market overvalued?” These headlines are not designed to make you a better investor. They are designed to get you to watch, click or subscribe.
Apollo puts the distinction clearly. If a financial channel told its audience to build a diversified portfolio, hold it for decades, and not overreact to daily movements, that would be broadly correct advice. It would also make for very little content and almost no advertising revenue. The incentive structure of media does not align with the incentive structure of long-term investing.
David brings it back to incentives: the media’s job is to sell advertising space. The job of a fee-for-service adviser is to get good outcomes for clients. Those are different incentives, and they lead to very different recommendations.
Financial news can be informative and intellectually interesting. It is not investment advice, and consuming it as if it were will, over time, lead most investors to make worse decisions than they would have made by doing nothing.
Myth 10: You Must Back the Next Big Trend
Every investment cycle brings a trend that looks unmissable. Crypto. Gold. AI. Each one generates a sense that investors who do not participate will be left behind.
Apollo offers two reasons why chasing trends typically does not improve outcomes.
First, by the time a trend is obvious enough to generate headlines and social media momentum, the market has already begun pricing in expectations of future growth. You are not buying the trend at the beginning. You are paying a price that already reflects the expectation of its continuation. That price may or may not prove to be justified.
Second, the best-performing asset in any given year is often something nobody was discussing at the start of that year. Apollo notes that one of the best-performing Australian stocks in a recent year was not an AI company or a gold miner. It was a drone manufacturer. Nobody was producing content telling investors to buy drone stocks a year earlier.
The alternative to trend-chasing is diversification. A broad portfolio across many companies and many markets will already contain the next big thing before it becomes obvious. Not because you identified it early, but because it was already in your portfolio. This is one of the most powerful practical arguments for passive investing and index fund investing: you capture exposure to emerging winners without needing to predict them.
David makes the same point through a Capital Partners example. Clients who have held broadly diversified portfolios have owned NVIDIA for approximately 20 years, well before it became one of the most discussed stocks in the world. They did not pick it. They held everything.
Frequently Asked Questions
What does it actually mean to “beat the market”?
Beating the market means generating a higher return than a benchmark index, such as the ASX 200 or the S&P 500, over a given period. The problem is that outperforming an index tells you nothing about whether you are on track to meet your own financial goals. A portfolio that beats the index in a strong year may still be poorly constructed for long term investing in Australia. The more useful question is: are you on track to achieve the goals that matter to you, by the time you need to achieve them?
Is passive investing better than active investing in Australia?
The evidence in Australia, as reported annually by S&P SPIVA, consistently shows that the majority of active fund managers fail to outperform their benchmark index after fees over five and ten-year periods. Passive investing in Australia, through index funds or structured diversified funds, has historically delivered more reliable outcomes for most investors. That does not mean active management is never appropriate, but the starting position for most long-term investors should be a broadly diversified, low-cost approach.
How do I know if I am on track without comparing myself to the market?
The right comparison is against your own plan. A well-structured investment strategy defines what return you need, over what timeframe, to achieve specific goals: retirement income, funding education, transferring wealth. A qualified adviser models those goals and tracks your progress against them. The index is not your goal. Reaching your specific financial destination by your required date is.
Is cash a safe place to keep money long-term?
For short-term needs and emergency reserves, cash is appropriate. As a long-term strategy, cash loses ground to inflation consistently. ASIC MoneySmart provides useful guidance on the long-term impact of inflation on savings. If you are holding significant cash as part of a long-term investment plan, a review of your strategy with a qualified adviser is worth considering.
Is it safe to invest internationally from Australia?
Yes. International investing carries its own considerations, including currency movements and different regulatory environments. But limiting a portfolio to Australia concentrates risk in one market that represents approximately 2 per cent of the global opportunity. A broadly diversified international portfolio spreads that risk across many economies and thousands of companies. For most long-term investors, international diversification reduces overall risk rather than adding to it.
How do I stay invested when markets are falling?
This is one of the most important questions in investing, and the best time to answer it is before a downturn occurs, not during one. A well-structured plan built around your specific goals and risk tolerance gives you a framework for staying the course. Understanding that markets have been positive the majority of quarters and calendar years, with negative years being the exception rather than the rule, helps put individual downturns in perspective. Speaking with a qualified adviser before making changes during a volatile period is strongly recommended. Emotional decisions made during market falls are among the most common and costly mistakes in long-term investing.
Building an Investment Strategy That Lasts
If the 10 myths above have anything in common, it is that they all involve making decisions based on the wrong things. Recent performance. Short-term headlines. The fear of missing out. The instinct to run when things get uncomfortable.
The alternative is a structured approach to long-term investing in Australia and globally. That means building a portfolio around your goals, not a benchmark. Holding broadly diversified positions across markets and asset classes. Keeping investment costs low. And staying invested through the inevitable volatility that comes with participating in markets over time.
We work with Perth families to build investment strategies they can hold with confidence, through different market conditions and different stages of life. We are fee-for-service, fiduciary advisers, independently audited to CEFEX standard. Our advice is never shaped by commissions or product relationships. Our only incentive is to get the right outcome for you.
Our investment strategies and wealth planning services are designed to help you build a portfolio that reflects your goals, your timeframe, and your capacity for risk. Our retirement planning services can help you think through how your investment strategy interacts with your retirement income needs.
Not sure where you currently sit? Our Wealth Management Risk Assessment takes a few minutes and gives you a clear starting point.
Schedule a Meeting to speak with our team.
You can also listen to the full conversation with Apollo Lupescu in Episode 76 of The Purposeful Investor Podcast.
