'Do you like to read history? Do you believe most of it? Do you use it as a guide for the future? Me too. However, the danger is that we frequently re-imagine the past in order to meet our present needs. Indeed, research shows that we do this with the economy, the stock market, politics and everything else.

'The problem is that this has the potential to make history dangerous. What begins as an honest attempt to objectively study the past can quickly devolve into confirming our existing beliefs. How can this affect investors?

'Well, the amount of investment data available is incredible and increasing by the day, meaning anyone can create a story and then sift through mountains of historical data to find examples to back it up. Do you believe stocks are overpriced?

'History backs this up. Do you believe stocks are cheap? History backs this up too. Indeed, we can use history to show that increasing interest rates is both good and bad for stocks and that buy-and-hold investing is both the best and worst strategy.

'The fact is that many of the historical events that investors try to study (recessions, bear markets, bouts of high inflation) are rare enough that there aren’t many episodes from which to draw conclusions. However, history can be an excellent teacher of broad, general lessons. Here are three:

'The stock market cannot be consistently forecasted, let alone timed, and the only sure way to capture superior long-term returns is to ride out the declines.

'Therefore, all long-term successful investing is goal-oriented and planning-driven. All failed investing is market-focused and current events-driven;

'Long-term investing success is only a by-product of the economy and stock markets; it is proportional to how the investor reacts to their investment journey.

'When things are calm, most people can keep their heads straight. Emotions take over when things get exciting. Importantly, decisions made during those crazy moments are the most important decisions we’ll ever help our clients make.'

Amyr Rocha Lima is a partner at Holland Hahn & Wills and chairman of the CISI Financial Planning Forum Committee.

• This article originally appeared in the Nov-Dec 2022 issue of Financial Planning Today magazine. Amyr Rocha Lima writes a regular column for each issue of the magazine. You can subscribe to the magazine by clicking on 'My Account' (once registered for the site) and choosing from the options available.