When it comes to building long-term wealth, evidence—not intuition or superstition—is the foundation for success. Evidence-based investing involves trusting independent, peer-reviewed research and time-tested data to make investment decisions. Despite this, many investors continue to act on hunches, unverified beliefs, or even superstitions that lack any real value in today’s fast-moving financial markets.
The Cost of Superstition
The influence of superstitious beliefs on investing can have measurable costs. In one well-known study from 2014, researchers examined superstitious behavior in the Taiwanese stock market. They found that the number "eight," associated with prosperity in Chinese culture, appeared more frequently in investors’ buy prices, while the number "four," associated with death, was avoided. Investors who leaned into these beliefs experienced significantly lower returns, underperforming more rational peers by nearly 9% per year. More recent research on Chinese IPOs echoed this, revealing that even seemingly harmless superstitions can impact investment performance.
Irrational Beliefs Aren't Limited to One Market
Although superstitious trading behaviors may be more apparent in some cultures, investors worldwide aren’t immune to irrational beliefs. In Western markets, for example, there’s the October Effect—the idea that October is a particularly dangerous month for stock markets. Historically, October isn’t more prone to market crashes than any other month. Yet, media hype around the October Effect stirs investor anxiety, impacting trading behavior every year.
Other popular beliefs include the “sell in May and go away” adage, suggesting that investors should avoid stocks over the summer months, or the so-called “Santa Claus Rally", a perceived pattern of rising stock prices in December. While these seasonal patterns can occasionally align with market performance, the inconsistency makes them unreliable at best and counterproductive at worst. Choosing to sell in May or buy in December can just as easily leave investors missing gains or exposed to losses.
The Danger of “Wacky” Market Indicators
The financial world is filled with odd “indicators” that often capture headlines despite having zero predictive power. The Super Bowl Indicator, for example, suggests that the outcome of the Super Bowl predicts stock market direction for the year—a phenomenon with no connection to financial fundamentals. Similarly, lipstick sales, hemlines, and butter production in far-off countries have all been touted as market predictors. While amusing, such indicators belong to the realm of folklore, not finance.
Recognizing Subtle Biases in Investment Decisions
Even the most disciplined investors can fall prey to subtler forms of irrationality. Home bias—favoring stocks from one’s own country or companies one’s familiar with—is common and can lead to a less diversified portfolio. Anchoring, or sticking to poor investment decisions out of a reluctance to acknowledge losses, is another form of irrational behavior that can impact performance.
Active management itself can sometimes be seen as an act of overconfidence. Believing that a single manager can consistently outperform the combined knowledge of millions of market participants is a tall order. While some fund managers may beat the market occasionally, evidence suggests that the majority fail to do so consistently. Moreover, even for those who succeed, it’s challenging to discern whether outperformance is due to skill or merely luck.
Embrace Evidence, Avoid Superstition
The reality is that successful investing relies on evidence-based strategies, not market myths. While it’s easy to get swept up in financial “rules of thumb” or eye-catching indicators, these shortcuts rarely lead to sustained success. The best path forward is one grounded in diversified, disciplined, and rational decision-making.
At WealthFactor, we believe that trust in data and long-term principles is the surest way to grow wealth. Superstition has its place—but it doesn’t belong in your investment strategy.
