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Behavioral Friction and Portfolio Drag

Most investors believe their biggest enemy lives out there —in the market, the Fed, inflation prints, earnings misses, geopolitical headlines, or the mysterious whims of traders who seem to know something you don’t. That belief is comforting. It implies that underperformance is caused by forces beyond your control. If the market would just behave rationally, if central banks would stop moving goalposts, if news cycles would calm down, everything would work. But for the vast majority of investors, the real source of long-term underperformance is not volatility, valuation errors, or asset allocation mistakes. It is behavioral friction —the steady, invisible resistance created by our own reactions, habits, and emotional impulses. Over time, that friction creates portfolio drag , quietly shaving returns year after year without triggering a single dramatic failure. No margin call. No spectacular blow-up. Just chronic underperformance hiding in plain sight. What Behavioral Friction Ac...

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