2025’s Biggest Investing Lesson: Slow Down

Core Insights - The primary wealth destroyer in 2025 was not external factors like tariffs or AI disruption, but rather the speed of trading and decision-making in response to news [1][2] Group 1: Market Volatility and Speed - The 2020s have experienced 440 trading days with daily movements of 1% or more, compared to a typical decade average of 507 days, indicating an unprecedented level of volatility [1] - Investors felt pressured to react quickly to news, leading to a "fastest finger" mentality that resulted in exhaustion and sub-standard returns [2][3] Group 2: The DeepSeek AI Model Impact - The introduction of China's DeepSeek AI model in January 2025 led to a significant drop in Nvidia's stock, which fell by 17% in a single day as investors rushed to sell [4] - Subsequent analysis revealed that the initial cost estimate for DeepSeek was misleading, and major tech companies continued to invest heavily in data centers, benefiting Nvidia, which reported revenue and profit gains of over 65% and 57% year-on-year [5][6] Group 3: The TACO Trade Phenomenon - The TACO trade, based on the pattern of market reactions to President Trump's tariff announcements, became crowded as many investors attempted to capitalize on it, ultimately leading to poor outcomes [8][9] - Historical data shows that missing just the 10 best days in the stock market over 30 years could result in returns being less than half compared to staying fully invested [10] Group 4: Interest Rate Reactions - Traders reacted hastily to interest rate signals, leading to incorrect predictions about the number and timing of rate cuts, which did not align with actual market performance [11][12] - Despite these misjudgments, the S&P 500 rose over 23% in 2024, demonstrating that staying invested can yield positive results even when predictions are wrong [12][13] Group 5: The Case for Patience - The overarching lesson from 2025 is that the market rewarded patience and punished haste, as panic sellers locked in losses while patient investors captured recoveries [17][18] - The discipline to move slower than the market can provide a significant edge, emphasizing the importance of judgment over urgency [19]