Less than two weeks ago the market was riding a six week losing streak. Day after grinding day, prices drifted lower and investor sentiment grew darker. Today, the percentage of bearish investors is lower than it was at the beginning of the decline. More importantly, they seem to be putting money where their survey response is. A quick glance at barchart today shows 159 stocks at new highs. That’s not a new year-to-date or 52 week high. Those are new all-time highs. This is not a recommendation to buy any of these stocks. It is simply an observation that investing by instinct or gut feel is a terrible way to make money.

It’s not that investor attitudes are necessarily an inverse indicator. They might look that way in hindsight, but in real time they are a trailing indicator. Your own feelings about the future of a market are very likely no more accurate than those of anyone else. We all have access to the same information at the same time. To think that any one of us can better interpret that information than all the rest of us is a conceit. This is why market strategists and portfolio managers have such a difficult time beating the market consistently – there is no edge to be gained in using a freely accessed commodity in an effort to divine the future.

Rather than trying to guess what will happen, we have to be able to concede that the future is unknowable. Once that startling admission is made, our egos become untethered to decisions that turn out to be wrong. It’s OK to make incorrect investment decisions – nobody reasonably expects perfection. It’s not OK to let those incorrect decisions imperil your future. Our edge isn’t in future telling, it’s in letting our winners run while cutting losses short. It’s in realizing that protecting our assets is as important as accumulating them in the first place.