But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. (KJV): the craving, not the asset, is what drives bad risk decisions.
1 Timothy 6:9The gap between what funds earn and what investors earn
Here is an uncomfortable, well-documented fact: the average investor earns meaningfully less than the very funds they’re invested in. Morningstar’s annual “Mind the Gap” study measures this directly by tracking actual money flows in and out of funds, not just the funds’ published returns. For the ten years ending December 2024, the average dollar invested in U.S. mutual funds and ETFs earned about 7.0% per year, roughly 1.2 percentage points less, annually, than those same funds’ 8.2% published total return (Morningstar, “Mind the Gap”). Compounded over a decade, that gap is not a rounding error; Morningstar estimates it cost investors about 15% of the total return their funds actually generated. The cause isn’t bad funds. It’s investors moving money in and out at the wrong times, buying after a fund has already risen and selling after it has already fallen, which is precisely backward from “buy low, sell high.”
Panic-selling and FOMO are the same mistake, worn differently
Panic-selling shows up during a downturn: a portfolio drops, fear takes over, and the investor sells near the bottom, locking in the loss and missing the recovery that historically follows. FOMO (fear of missing out) is its mirror image during a rally: an asset has already run up, and the investor buys in late, chasing a gain that’s largely already happened, right before it reverses. Both are driven by the same thing (reacting to a recent price move instead of a long-term plan), and both are exactly the pattern the Mind the Gap data captures at scale. Neither impulse is a character flaw unique to careless people; it’s a predictable response to watching a number move, which is why the fix is structural, not willpower alone.
Speculation dressed as investing
Crypto assets, meme stocks, and other hype-driven trades are not automatically illegitimate to own, but buying them on the promise of fast, outsized gains is speculation, not investing, and 1 Timothy 6:9 speaks to this posture: “they that will be rich fall into temptation and a snare” (KJV). The craving to be rich, not the asset itself, is what “drown[s] men in destruction.” It pushes people to bet money they can’t afford to lose, on outcomes they don’t understand, based on momentum rather than any real analysis of value. Proverbs 28:20 draws the same line: the one who “maketh haste to be rich shall not be innocent” (KJV). FINRA’s own consumer guidance distinguishes investing (a researched stake in a productive asset, held with a reasonable expectation of return) from gambling (a bet on an uncertain outcome, with the odds typically against the bettor), and warns that dressing the second up as the first doesn’t change which one you’re actually doing (FINRA, “Gambling vs. Investing”). The test isn’t whether an asset is trendy; it’s whether you’d still hold it if it stopped moving for five years.
Guardrails that remove the decision from the moment
Because the failure mode is behavioral, not informational, the fix is structural:
- Automate contributions (dollar-cost averaging, covered in index funds and diversification) so buying doesn’t depend on feeling confident that day.
- Write the plan down before you need it: target allocation and what you’ll do in a 20% drop, so a future panicked version of you is following a decision made calmly, not making a new one under stress.
- Limit how often you look. Checking a portfolio daily invites reacting to noise; checking it quarterly or annually filters most of that noise out.
- Separate “money I might lose entirely” from “money for my future” if you want to speculate at all: a small, clearly bounded amount, never the retirement account, never borrowed money.
None of this is personalized investment advice, and it isn’t a claim that every active trade or every crypto purchase is wrong; it’s the documented, repeated pattern of how ordinary investors lose the returns their own investments actually earned, and the guardrails that measurably help. Ben Felix’s lecture titled “Your feelings about future returns are not expected returns!” is on the video shelf, linked and not embedded.
Try it yourself: open the interactive tool for this lesson.
Before you go
Check yourself
1What does Morningstar's "Mind the Gap" study measure, and what did it find?
The gap between what funds returned and what investors in those funds actually earned. For the ten years to December 2024, the average dollar earned about 7.0% a year against the funds' 8.2% published return, a gap Morningstar estimates cost investors about 15% of the total return their own funds generated.
2What is the test for whether you are investing or speculating?
Not the asset (a stock can be bought either way) but the posture. The workable test: would you still hold it if it stopped moving for five years?
3Panic-selling and FOMO look like opposite mistakes. What makes them the same one?
Both react to a recent price move instead of a long-term plan: selling after a fall, buying after a rise. Neither is a character flaw unique to careless people; it is a predictable response to watching a number move, which is why the fix is structural rather than willpower alone.
Do this now
Write down now, while nothing is falling, exactly what you will do in a 20% drop, and decide how often you are allowed to look at the balance. A future panicked version of you should be executing a decision made calmly, not making a new one under stress.