Are you comparing apples and oranges when making investing decisions?

August 6, 2026 - 22:31

A new study from the SC Johnson College of Business is challenging how everyday investors measure their success. Researchers found that many people rely on metrics that look similar but are not truly comparable, leading to a false sense of confidence and, ultimately, poorer financial outcomes. The core issue, they say, is that investors often compare apples to oranges without realizing it.

The research focused on how people use benchmarks and performance indicators. For example, an investor might compare their stock portfolio's return to a broad market index, ignoring differences in risk, sector exposure, or time horizon. Or they might judge a fund's performance against a peer group that uses different strategies. These mismatched comparisons create an illusion of accuracy. When the numbers look close, people feel validated. When they diverge, they may make hasty changes based on noise rather than substance.

The problem is not just about picking the wrong index. It is about a deeper cognitive bias. The researchers explain that humans naturally seek simple, digestible numbers to reduce anxiety. But when those numbers are not truly comparable, the confidence they provide is unfounded. This can lead to over-trading, holding losing positions too long, or abandoning a sound plan at the worst moment. The study suggests that a more disciplined approach, one that defines clear, personalized benchmarks before making any investment, is far more effective than chasing whatever metric is popular at the moment.

The takeaway is not to abandon metrics altogether, but to be far more skeptical about what they actually measure. Before making any decision, ask whether the comparison is truly like-for-like. If not, the numbers may be doing more harm than good. The cost of that false confidence, the researchers warn, is real and measurable in a portfolio's bottom line.