Market Volatility, the Truth About Stock Picking & Retirement Spending | Ep 18

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The market dropped 1% and your phone lit up with alerts. Must be time to panic, right?

Actually, it's just Tuesday. Or Wednesday. Or any other week in a normal year.

The Volatility You're Not Seeing

Adam pulled up data that surprises most investors: on average, the S&P 500 falls by 1% or more on 31 different trading days each year. That's roughly once every other week.

This year through mid-October? We've already hit 23 of those days. Which means we're actually below the historical average for market drops, despite how noisy 2025 has felt.

Compare that to 2022, when we saw 63 days with 1% or larger declines. That bear market felt endless because the volatility was constant and unrelenting, rather than the sharp drops and quick recoveries we've grown accustomed to lately.

Even 2017, the calmest market year in recent memory with only four 1% down days, still had people worried about North Korea tensions and geopolitical uncertainty. There's never a moment when everything feels perfectly safe.

The Stock Picking Numbers Tell a Story

Recent data from Jefferies showed only 22% of stock pickers are beating the S&P 500 this year through September. That's a significant drop from 2022, when 60% were outperforming.

Before you conclude that stock picking is dead, consider what those numbers actually mean. When the largest companies in the index are doing well, a market-cap weighted index becomes hard to beat. The top 10 stocks represent nearly half the S&P 500's value, with the Mag Seven alone making up about 35%.

The equal-weight version of the S&P 500 tells a different story. As of mid-October, the traditional market-cap weighted index was up 14.3% for the year. The equal-weight version? Just 8.3%. Same 500 stocks, but a six percentage point difference in returns based purely on how you weight them.

This isn't an argument for or against stock picking. It's a reminder that broad categories like "the market" or "stock pickers" hide enormous variation beneath the surface. Process matters more than any single year's results.

The Psychology of Permanent Worry

Adam posed a question that cuts to the heart of investor psychology: is there ever a time when things are going well enough for people not to worry?

Multiple strong years of returns create their own anxiety. People start viewing the market like an inflating balloon that must eventually pop. But that's not how markets actually work.

All-time highs aren't rare anomalies. They cluster together during bull markets, which historically last far longer than most people expect. The forward-looking returns after all-time highs have historically been above average, not below.

The real issue isn't the market level. It's our brains. Losses hurt about twice as much as gains feel good. We evolved to avoid threats, not to invest optimally for 30-year time horizons. That wiring served us well when running from predators, but it's terrible for building wealth.

Social media amplifies the problem. A whole generation watched The Big Short and spent the next decade calling market tops, predicting crashes, and staying defensive. Meanwhile, the "boring" buy-and-hold investors quietly accumulated wealth through the noise.

Eric Balchunas dubbed it "the Big Long," the opposite of the dramatic market-timing story. The people who got rich weren't the ones calling tops. They were the ones who stayed invested.

When Have You Saved Enough?

The Art of Spending, Morgan Housel's new book, tackles a question that paralyzes many successful accumulators: when is enough actually enough?

Social media makes this harder. You can always find someone with more wealth, a bigger house, a fancier lifestyle. The comparison trap never ends because there's always another level up.

Adam recommends a simple exercise for clients approaching retirement: take a blank calendar and fill in your first month of retirement. What are you actually doing with all that time?

Most people struggle with this. They've spent decades obsessing over the numbers, hitting their target portfolio balance, and calculating withdrawal rates. But they've spent almost no time figuring out what they actually want to do with their freedom.

The first month usually gets filled with house projects and the backlog of tasks that accumulated during working years. But what about month six? Month twelve? Year five?

The financial calculations matter. But so does knowing what you're retiring to, not just what you're retiring from.

Numbers and Noise

Markets fluctuate constantly. Stock picking strategies come in and out of favor. All-time highs feel scary even when the data says they shouldn't. These patterns repeat because they're driven by human psychology, not by fundamental changes in how markets work.

The challenge isn't predicting what comes next. It's sticking with a thoughtful plan while your brain screams at you to do something, anything, to avoid the discomfort of uncertainty.

In the game of process vs. prediction, process wins.

Listen to the full conversation on Long Story Short: