Jeff Aronson warns that prolonged success breeds dangerous overconfidence. When an investor is on a hot streak and feels they can do no wrong, their perception of risk becomes warped. This psychological shift, where they think "I must be good," is precisely when underlying risk is escalating, not diminishing.

Some companies execute a 3-5 year plan and then revert to average returns. Others 'win by winning'—their success creates new opportunities and network effects, turning them into decade-long compounders that investors often sell too early.

The dominant strategy of investing huge sums into companies believed to be generational outliers has a critical failure mode: it can destroy viable businesses. Not every market can absorb hyper-growth, and forcing capital into a 'pretty good' company can lead to churn, stalls, and ultimately, a ruined asset.

To avoid emotional, performance-chasing mistakes, write down your selling criteria in advance and intentionally exclude recent performance from the list. This forces a focus on more rational reasons, such as a broken investment thesis, manager changes, excessive fees, or shifting personal goals, thereby preventing reactionary decisions based on market noise.

The underperformance of active managers in the last decade wasn't just due to the rise of indexing. The historic run of a few mega-cap tech stocks created a market-cap-weighted index that was statistically almost impossible to beat without owning those specific names, leading to lower active share and alpha dispersion.

The typical 'buy and hold forever' strategy is riskier than perceived because the median lifespan of a public company is just a decade. This high corporate mortality rate, driven by M&A and failure, underscores the need for investors to regularly reassess holdings rather than assume longevity.

Investors often judge investments over three to five years, a statistically meaningless timeframe. Academic research suggests it requires approximately 64 years of performance data to know with confidence whether an active manager's outperformance is due to genuine skill (alpha) or simply luck, highlighting the folly of short-term evaluation.

Timing is more critical than talent. An investor who beat the market by 5% annually from 1960-1980 made less than an investor who underperformed by 5% from 1980-2000. This illustrates how the macro environment and the starting point of an investment journey can have a far greater impact on absolute returns than individual stock-picking skill.

Even long-term winning funds will likely underperform their benchmarks in about half of all years. A Vanguard study of funds that beat the market over 15 years found 94% of them still underperformed in at least five of those years. This means selling based on a few years of poor returns is a flawed strategy.