PSYCHOLOGY: Notable Investing Paradoxes

Posted on February 15, 2026 by Dr. David Edward Marcinko MBA MEd CMP™

Dr. David Edward Marcinko MBA MEd CMP

Eugene Schmuckler PhD MBA MEd CTS

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A paradox is a logically self-contradictory statement or a statement that runs contrary to one’s expectation. It is a statement that, despite apparently valid reasoning from true or apparently true premises, leads to a seemingly self-contradictory or a logically unacceptable conclusion. A paradox usually involves contradictory-yet-interrelated elements that exist simultaneously and persist over time. They result in “persistent contradiction between interdependent elements” leading to a lasting “unity of opposites”.

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1. The Paradox of Skill

  • As more investors become skilled, skill matters less.
  • When everyone is highly skilled, outperformance becomes mostly luck because the competition is too tight.

2. The Market Efficiency Paradox

  • Markets are efficient because people believe they are not.
  • If everyone believed markets were efficient, no one would try to exploit mispricings—and markets would become inefficient.

3. The Liquidity Paradox

  • Liquidity is abundant until you need it most.
  • In crises, assets that were easy to trade suddenly become impossible to sell at a fair price.

4. The Volatility Paradox

  • Strategies that appear safe (low volatility) can be the most dangerous.
  • Strategies that look risky (high volatility) can be safer long-term.
  • Example: selling insurance-like options feels safe—until it blows up.

5. The Risk Paradox

  • Taking more risk can lead to lower returns if the risks are poorly compensated.
  • Taking less risk can lead to higher returns if it keeps you invested through downturns.

6. The Diversification Paradox

  • Diversification always feels unnecessary before a crisis and always feels insufficient during one.

7. The Time Paradox

  • The longer your time horizon, the less risky stocks become.
  • But the longer your time horizon, the harder it is to stay disciplined.

8. The Cash Paradox

  • Holding cash feels safe, but over long periods it’s one of the riskiest assets because inflation quietly destroys it.

9. The Contrarian Paradox

  • Being contrarian works only when you’re right.
  • Most of the time, the crowd is correct—so being contrarian for its own sake is a losing strategy.

10. The Information Paradox

  • More information doesn’t always lead to better decisions.
  • Sometimes it leads to overconfidence, noise-chasing, and worse outcomes.

11. The Performance Paradox

  • The best-performing funds are often the worst-performing funds right before and after their peak.
  • Investors chase past returns and end up buying high and selling low.

12. The Leverage Paradox

  • Leverage boosts returns—until it destroys them.
  • The more leverage you use, the more fragile your portfolio becomes.

13. The Behavioral Paradox

  • You can know all the right investing principles and still fail because behavior > knowledge.

14. The “Do Nothing” Paradox

  • Doing nothing is often the most profitable strategy.
  • But doing nothing is psychologically the hardest thing to do.

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EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors@outlook.com -OR- http://www.MarcinkoAssociates.com

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