The Market Doesn’t Know You Exist

“We hope the markets go up.”

It’s the phrase I’ve heard most often in ten years of financial consulting. I’ve heard it in meetings with entrepreneurs managing multi-million-dollar portfolios, in private messages from worried savers, and in phone calls from clients during market downturns.

We hope they rise. We hope the market doesn’t crash. We hope inflation comes back under control. We hope this time is different.

The problem is that the market does not care what you hope for. The market doesn’t know you exist. It does not know your goals, your fears, your mortgage, your child’s university tuition, or your retirement plan. The market simply does what markets do: it rises, falls, moves sideways, crashes, and rebounds — with or without your permission, with or without your approval, with or without your hope.

In finance, hope is not a plan. It is the absence of a plan.

(And it’s not even a particularly original strategy: it’s the one used by 100% of people who don’t actually have one.)

Reacting to Events Instead of Controlling Them

There is a huge difference between “having a plan” and “reacting to events.” Most Italian savers live in the second condition without even realizing it.

They buy an ETF because they read about it on a forum. They add a government bond because the state is offering a decent yield. They keep €80,000 in a checking account because “you never know.” They sell when the market drops 15% because “this time is different, I can feel it.” Then they buy back in after the market rebounds 20% because “okay, the worst is over.”

That is not investing. It is reacting. It is sailing without a course, hoping the wind stays favorable.

The data confirms how widespread this phenomenon really is. A survey by Intesa Sanpaolo found that 9 out of 10 Italian savers describe themselves as completely risk-averse. Yet only 6.7% identify long-term returns as the primary objective of their investments. In other words: almost everyone wants to avoid losses, while almost no one has a clear understanding of what they actually want to achieve.

This asymmetry — maximum attention to what people fear, minimal attention to what they truly want — creates the perfect environment for hope. And hope, as an investment strategy, has a catastrophic track record.

Jason Zweig summarized it with surgical precision:

“Investing is the ongoing effort not to become your own worst enemy.”

Not the enemy of inflation. Not the enemy of bear markets. Not the enemy of central banks. Your own worst enemy. Because it is we ourselves — through our emotional reactions — who turn temporary declines into permanent losses and short-term rallies into unrealistic expectations.

Why Only the Process Works

Behavior Beats Analysis. Every Time.

In Law #15 of his investing principles, Morgan Housel writes a sentence that deserves to be framed:

“Good behavior with imperfect information can still work. Tons of information with bad behavior is a lit fuse.”

Read that again. A disciplined investor with a mediocre portfolio will outperform, over the long run, an emotional investor with the perfect portfolio. Because the perfect portfolio does not exist if the person holding it dismantles it every time the market sneezes.

(Which is also why the portfolios of deceased clients often outperform those of living clients: dead investors cannot panic sell. Morbid, but statistically accurate.)

Charles D. Ellis, one of the fathers of modern investment consulting, described the winning path with disarming simplicity:

“Define the right investment policy. Commit to following it. Stay the course.”

It is emotionally difficult. It is intellectually boring. But it is the only path that works. Not one of many — the only one.

Process vs. Outcome: The Distinction That Changes Everything

One of the most dangerous mistakes in financial thinking is confusing the quality of the process with the quality of the outcome. They are two very different things — and understanding this distinction is essential for investing without emotions distorting your judgment.

A good process can produce a bad short-term outcome. You invested in a diversified and disciplined way, yet the market fell 18% this year. It happens.

A bad process can produce a good short-term outcome. You bought a single stock because your brother-in-law recommended it, and six months later it was up 40%. That happens too.

The difference? Only the process is controllable. The outcome is not. Ever. Under any circumstance.

Anyone who judges the quality of a financial plan based on 12 months of results is like someone judging the quality of their diet based on this morning’s weight. A single data point means nothing. The consistency of the system over years and decades means everything.

The Competent Stranger Test

Charles D. Ellis proposed a test that remains the gold standard for understanding whether you truly have a plan — or whether you are simply improvising:

“The Prime Minister calls you and says: ‘You are leaving tomorrow on a secret 10-year mission with no communication whatsoever. I have hired a competent professional you do not know — the Competent Stranger — who will manage your portfolio faithfully according to your instructions. You have one hour to write those instructions.’”

Could you write them? In one hour? On a single sheet of paper?

If the answer is yes — if you can clearly define goals, time horizons, asset allocation, rebalancing rules, and the circumstances under which action should be taken — then you have a plan. If the answer is “it depends on how the markets perform,” then you do not have a plan. You have hope.

(And if the answer is “I’ll ask my advisor,” the next question is: would your advisor actually be able to write them? Because many advisors would struggle to do it even for their own money.)

How to Build a Plan That Replaces Hope

Investing without emotions does not mean becoming a robot. It means building a system that continues to work even when emotions inevitably appear — because they will appear, for everyone, and anyone who says otherwise is either lying or has never experienced a 30% decline in their net worth.

Here is the practical process.

Write the Plan Down. On Paper.

Not in your head. Not “I more or less know what to do.” Write it down. On paper. In a document. In a file. But make it explicit, black on white, with numbers and dates.

The plan should include:

Element	Example
Objectives	Retirement planning, child’s university fund, emergency fund
Time Horizons	20 years, 12 years, already funded
Target Allocation	70/30 for retirement, 50/50 for university, 100% cash for emergencies
Rebalancing Rules	Annually, or whenever an asset class deviates more than 5% from target
What NOT to Do	Do not sell during market declines. Do not change allocation based on daily news

A written plan is your insurance policy against yourself. When the market crashes and your brain screams “sell everything now,” the document is still there — calm, rational, written when your mind was clear. This is not a minor detail. It is the difference between those who survive storms and those who sink.

Review It Once a Year. Not Once a Day.

Jason Zweig has a golden rule:

“About 99% of the time, the most important thing to do with your portfolio is absolutely nothing.”

The annual review is meant to verify only three things:

• Have your goals changed? (a new child, a career change, an inheritance)
• Has your allocation significantly drifted from the target?
• Is rebalancing necessary?

If the answer to all three is “no,” close the file and go back to living your life. A financial plan does not require daily maintenance. It requires annual discipline.

Rebalance. Mechanically.

Rebalancing is the act of bringing your portfolio back to its target allocation. If equities have grown from 70% to 80%, you sell part of the position and bring it back to 70%. If they fall to 60%, you buy and restore the allocation to 70%.

It feels counterintuitive: you are selling what has gone up and buying what has gone down. But that is precisely the mechanism that forces you to buy low and sell high — the exact opposite of what 90% of investors instinctively do.

Ignore the Noise.

Television news, alarming headlines, analyst forecasts, the brother-in-law who made 200% on a single stock — it is all noise.

Noise does not change your plan. It changes your emotions. And emotions, when not governed by a process, change your decisions. Wrong decisions change your wealth. Permanently.

As we wrote in our article about the seven mental mistakes that sabotage investors: emotions tied to the market eventually fade. Decisions made under emotional pressure remain.

The Plan Is the Strategy.

It is not a complement to the strategy. It is not a preparatory document. It is not an appendix. The plan is the strategy.

Investors who have a plan and follow it do not need to predict markets. They do not need to time corrections. They do not need to hope. They have a level of risk calibrated to their objectives, a coherent allocation, clear rules, and the discipline to follow them.

Everything else — forecasts, opinions, hype, panic — is entertainment disguised as information.

FAQ

Is It Really Possible to Invest Without Emotions?

No — and that is not even the goal.

Emotions are human, inevitable, and sometimes even useful because they signal that something truly matters to us. The point is not to eliminate emotions, but to prevent them from driving operational decisions. That is exactly what a written plan is for: it acts as a filter between what you feel and what you do.

When the market drops 25% and your stomach tightens, the plan should make the decision — not your instincts.

How Often Should I Check My Portfolio?

Once a year for a complete review. At most, once every quarter for a quick check.

Data consistently shows that the more often investors look at their portfolios, the more they react — and the more they react, the worse their investment performance tends to be.

Research by Paul Andreassen confirmed that investors who receive frequent updates generally achieve lower returns. Paradoxical, but true: the less you watch, the better you tend to invest.

Should My Financial Plan Never Change?

Your financial plan should change when your life changes — not when the market changes.

A new child, a career transition, an inheritance, or a serious illness are legitimate reasons to review your plan. A 20% market decline, a 30% rally, a geopolitical crisis, or a sensationalist headline are not.

The plan adapts to your life. The market is a tool, not the objective.

How Can I Tell If I Truly Have a Plan — or If I’m Just Improvising?

Take Charles D. Ellis’s “Competent Stranger” test: imagine having one hour to write all the instructions needed for a complete stranger to manage your portfolio for the next ten years.

If you can clearly define your goals, time horizons, asset allocation, and rules, then you have a plan. If the first thought that comes to mind is “it depends on how the markets perform,” then you are improvising.

And improvising with your own money, however human it may be, is never a good idea.

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