Chasing Performance Is Only a Problem Without a Plan

🔍 Key Insight:

Performance-chasing isn't inherently irrational. It becomes dangerous when done without a system. This myth’s real lesson is that ‘reaction without a rulebook’ is what leads to disaster.

🧠 The Psychology

Investors are rewarded early in bull markets, reinforcing behavior that may not be sound. This reinforcement loop creates bubbles—not from data, but from collective conviction.

📊 Evidence

The dot-com boom wasn’t just a tech story. It was the cumulative effect of investors chasing early winners—until there was no one left to buy. One real-world example from the book: a woman who turned $10K into millions, only to lose it all by never exiting.

⚠️ The Trap

Without an exit strategy, you’re just hoping. Most trend participants don’t profit—they create the trend and exit too late.

✅ Actionable Strategy

Be a *follower*, not a *believer*. Trend following—when done systematically—can identify when to enter and exit based on real price behavior, not hope.

🧪 Proof Point

S&P’s Diversified Trends Indicator (DTI) is one real-world example. From 1988 to 2010, it had only 42% of the S&P 500’s volatility, and less than one-third of its drawdown—with near-equal returns.

💡 Bottom Line

The problem isn’t chasing performance. It’s doing it without discipline. The right strategy doesn’t fear trends—it thrives in them.