Doing something…anything…feels responsible, essential. But the opposite is true.

Reacting to news or market moves costs you money. Successful long-term investing requires discipline – and that means that, usually, the smartest investment decision is to do nothing.

Standing still feels like failure – even when it is the smartest move you can make.

Consider a soccer goalkeeper facing a penalty kick. The goalie must decide what to do – jump left, jump right or stay in the center – and must act before the kick. Research examining elite goalkeepers found that they rarely stood still; 94% of the time, they jump left or right. They stand still only 6% of the time.

It’s easy to see why. The goalie has a one-in-three chance of guessing correctly. But by jumping left or right, they show the crowd (and their teammates) that at least they tried. Stand still? Looks like they didn’t try. Doing nothing + being wrong is worse, it seems, than doing something + being wrong.

You do the same thing with your money. When prices fall and headlines scream, you sell. You feel better because you did something. But all you really did is sell while prices are down. You miss the rally that ensues.

Psychologists call this action bias – the urge to do something simply because doing nothing feels wrong.

Selling after a decline does not protect you. It just locks in the loss.

It’s bad enough that you sell after prices fall. What’s worse is that you must now decide when you get back in. In other words, you’re forced to make two decisions, not just one: when to sell, and when to buy back in.

Action bias forces you to engage in market timing. And investors who attempt it notoriously lose massive amounts of money. The better approach is to establish a long-term investment strategy before volatility arrives, then stick with it when it does.

Chasing what is already hot is speculation dressed up as opportunity.

Fear caused by a market decline isn’t the only emotion that leads you astray. Greed does too. After an investment has risen sharply, everyone starts talking about it. The Financial press covers it, friends mention it and social media amplifies it. Suddenly you feel foolish for not owning it, so you buy.

This is herd mentality – following what everyone else is doing. It is also recency bias – the mistaken belief that something will happen merely because it recent happened. (Prices will go up merely because they recently went up.)

Past Performance Makes You Chase Yesterday’s Results

It sounds logical to think that what just happened predicts what will happen next. But it never does. Past performance does not guarantee future results.

Headlines Are Usually Scary – and Trigger Bad Investment Decisions

Bad news creates fear. Fear creates the urge to act. That is often amplified by another behavioral bias: catastrophizing. A troubling event leads you to worry that something far worse is coming. Raining? You think it’ll cause a flood. Cold? It’ll soon freeze, causing power failures. A market decline becomes a fret that “the market will never recover.” A recession becomes “I’ll never be able to retire.” A period of disappointing performance becomes “investing doesn’t work anymore.”

Turning molehills into mountains – that’s why happens when your conjecture envisions the worst possible outcome. But that’s an emotional act, not sound investment analysis. Don’t let your long-term financial strategy be affected by the daily news.

Long-Term Investing Still Requires Rebalancing and Diversification

Doing nothing does not mean ignoring your investments. It just means doing only what you’d long planned to do. Like, rebalance.

Rebalancing is not reacting. It is systematic. Rebalancing involves both buying and selling, not just one or the other. You’re restoring your portfolio to your plan, not making changes because of what you think will the market will do next.

That difference matters. Rebalancing follows a plan. Action bias follows an emotion.

Stop Asking, “What Should I Do?”

When the market gets noisy, don’t ask, “What should I do?” Ask instead, “Has my financial plan changed?”

If your goals, time horizon and circumstances haven’t changed, your investment strategy shouldn’t change either.

Successful investing isn’t about reacting to every move the market makes. It is about creating a sound long-term investment strategy and having the discipline to follow it. Sometimes the smartest investment decision is to do nothing.

Learn more: Explore PFI’s Investment Management resources to build a disciplined strategy that can handle whatever the market does next.