Quick note before we start: this article shares general ideas about the psychology of investing and managing emotions. It’s not personal financial advice.
Why Your Brain Hates the Stock Market
Investing feels like a math problem, but it’s actually a biology problem. Our brains are wired for survival, not for managing a brokerage account. When the market drops, your “fight or flight” response kicks in. This was great for dodging predators thousands of years ago, but it’s terrible for your VFV or XEQT portfolio.
Loss aversion is a real psychological hurdle. Studies show that the pain of losing $1,000 is twice as intense as the joy of gaining $1,000. This bias leads many Canadians to sell their investments at the exact moment they should be holding or buying more.
The High Cost of Emotional Decisions
When you let panic guide your portfolio, you pay a “behavioral tax.” This isn’t a tax collected by the CRA; it’s the profit you lose by jumping in and out of the market.
According to data from Dalbar, the average investor consistently underperforms the market index. Why? Because they buy when they feel excited (at the top) and sell when they feel scared (at the bottom).
Impact of Missing the Best Days (S&P 500)
| Scenario | Annualized Return | Portfolio Value (After 20 Years) |
| Stayed Invested | ~9.5% | $61,400 |
| Missed 10 Best Days | ~5.3% | $28,200 |
| Missed 20 Best Days | ~2.6% | $16,700 |
Note: Data based on historical S&P 500 averages. Numbers are for illustrative purposes.
How to Build a “Boredom” Strategy
The best investors are often the ones who check their accounts the least. If you want to stay the course, you need to remove your emotions from the equation entirely.
- Automate your contributions: Set up a pre-authorized contribution from your bank to your TFSA or RRSP.
- Use All-in-One ETFs: Products like
VEQTorXBALrebalance themselves. You don’t have to decide which stocks to buy or sell. - Ignore the “Financial Porn”: News cycles thrive on fear. Headlines about a “Market Crash” are designed for clicks, not for your long-term wealth.
Pro Tip: If looking at your account balance makes you want to sell, delete your investing app for a month. Checking your 20-year goals on a daily basis is like watching grass grow with a microscope.
Canadian Context: The Safety Net
In Canada, we have tools that can help reduce “tax anxiety,” which often triggers bad decisions. Using a TFSA means you don’t have to worry about the tax hit when you eventually rebalance or withdraw. This simplicity helps you focus on the long term.
Comparing Account Psychology
| Feature | TFSA | RRSP |
| Mental Trigger | Easy to withdraw (Dangerous for spenders) | Tax penalty on withdrawal (Great for discipline) |
| Tax Stress | Zero tax on gains | Deferred tax (Requires planning) |
| Best For | Flexibility and growth | Long-term “locked-in” mindset |
Discipline Beats Intelligence
You don’t need a high IQ to be a successful investor. In fact, being “too smart” can sometimes lead to overthinking and constant tinkering. What you really need is a strong stomach.
Passive investing—simply buying the whole market and waiting—only works if you can actually wait. The math is easy; the waiting is the hard part. Experts like Ben Felix often remind us that the best strategy is the one you can actually stick to when things get ugly.
If you find yourself constantly checking the price of SHOP or TD and feeling your heart rate rise, your portfolio might be too risky for your personality. There is no shame in holding more “boring” assets like bonds or GICs if it prevents you from panic-selling during a market dip.
Key Takeaway: A “perfect” aggressive portfolio is useless if you sell it at the first sign of trouble. An “okay” conservative portfolio that you hold for 30 years will always make you more money than a “great” portfolio you abandoned in a panic.
Summary of Key Takeaways
- Loss aversion makes market drops feel worse than they actually are.
- Missing just a few days of market recovery can ruin your long-term returns.
- Automation is the best cure for emotional bias.
One thing to remember: Your portfolio is like a bar of soap; the more you handle it, the smaller it gets.
Next step: Log into your banking portal and set up an automatic transfer for your next payday so you don’t have to think about it.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult with a qualified professional before making investment decisions. Past performance is not indicative of future results.