The Peak-End Rule and XEQT: Why You Only Remember Your Best and Worst Investment Days

Ask me about investing through the COVID crash and here is what my brain gives me: a cold, lurching feeling in my chest from the second week of March 2020, watching my XEQT position drop more than 30% in about three weeks. I can still picture the Wealthsimple screen. Red everywhere. Not the kind of red that says “you had a bad day” – the kind of red that says “something is fundamentally broken and maybe it will never come back.”

That is the first image. The second one comes almost immediately after: the relief. Sometime around August or September 2020, I checked my portfolio and realized I had recovered almost everything. The world was still in chaos, but somehow the numbers were green again. I exhaled for what felt like the first time in months.

If you asked me to describe my investing experience from 2020 to 2021, those are the two snapshots my brain would serve up. The gut-punch and the relief. The crash and the comeback. It would make a great movie – dramatic, emotional, with a satisfying ending.

But here is the problem: that movie leaves out the most important part.

Between June 2020 and August 2021, XEQT went on a quiet, steady, almost invisible climb. Fourteen months of boring, unremarkable compounding. No headlines. No panic. No dramatic recoveries. Just my position growing a little bit every week, steadily, like a plant you forget to check on and then one day realize has doubled in size. Those fourteen months are where most of my actual wealth was built during that period. Not in the crash. Not in the recovery. In the boring middle.

And I can barely remember any of it. Not a single specific day. Not a single moment where I thought “today my portfolio grew 0.3% and that’s amazing.” Nothing. Those fourteen months might as well not have happened, as far as my memory is concerned.

For a long time, I thought this was just a personal quirk. I figured I was bad at remembering good times, or that the crash had been so traumatic it crowded everything else out. But then I learned about the peak-end rule, and I realized this was not a quirk at all. It is a universal feature of how human memory works. And it is quietly distorting how every XEQT investor evaluates their own experience.

What Is the Peak-End Rule?

The peak-end rule is a cognitive bias identified by Daniel Kahneman – the same Nobel Prize-winning psychologist behind prospect theory and loss aversion – along with his colleagues Barbara Fredrickson, Charles Schreiber, and Donald Redelmeier, primarily through research in the 1990s.

The core finding is disarmingly simple: when people evaluate a past experience, they do not average out every moment. Instead, they judge the entire experience based on just two snapshots – the most intense moment (the “peak”) and the final moment (the “end”).

Everything in between? Your brain mostly ignores it.

Kahneman and his colleagues discovered this through a series of now-famous experiments. In one study, participants were asked to hold their hand in painfully cold water (14 degrees Celsius) for 60 seconds. In a second trial, they held their hand in the same cold water for 60 seconds, and then for an additional 30 seconds while the water was secretly warmed to a slightly less painful 15 degrees. The second trial involved more total pain and more total time in discomfort. But when asked which trial they would prefer to repeat, the majority chose the longer trial – because it had a less painful ending.

More total suffering, but a better ending. And the better ending rewrote their memory of the entire experience.

The research on medical procedures was even more striking. In a study of colonoscopy patients, Redelmeier and Kahneman found that a longer procedure with a painful peak but a gentle, gradual ending was rated as less unpleasant than a shorter procedure that ended abruptly on a painful note – even though the longer procedure involved more total pain over more total time.

This revealed something profound about human memory: duration barely matters. Kahneman called this “duration neglect.” Whether an experience lasts five minutes or five years, your retrospective evaluation is dominated by two data points: the peak and the end. The other 99% of the experience fades into the background, like scenery you drive past too quickly to photograph.

Now translate this to investing. When you look back on your experience as an XEQT investor, your brain is not calculating your annualized return. It is not averaging your daily emotions over the years. It is pulling up two mental snapshots: the most emotionally intense moment (usually a crash or a rally) and the most recent performance (however your portfolio looks right now). Everything between those two points – the hundreds and hundreds of days where XEQT moved a fraction of a percent in either direction – is functionally invisible to your memory.

Those invisible days are where the compounding happens. Those invisible days are where your wealth is actually built. And your brain treats them like they never existed.

How the Peak-End Rule Distorts Your XEQT Experience

Once you understand the peak-end rule, you start to see it warping your investment perception in very specific, very predictable ways.

You overweight crashes

The March 2020 COVID crash. The 2022 bear market when inflation and rising rates hammered equities for months. The early 2025 tariff selloff when trade war headlines sent markets into a tailspin. These moments are the “peaks” in the negative direction – the most emotionally intense moments of your investing journey.

Because they are peaks, they occupy a massively disproportionate share of your investing memory. When you think about “what it’s like to invest in XEQT,” your brain reaches for these moments first. They become the defining chapters of your mental narrative, even though they represent a small fraction of your total time in the market.

You overweight recent performance

The “end” part of the peak-end rule means that whatever happened most recently dominates your overall evaluation. If XEQT had a strong first quarter of 2026, you feel good about your investment decision right now. If it had a rough quarter, you feel uneasy – regardless of what the five-year return looks like.

I notice this in myself constantly. After a good month, I feel like a genius for holding XEQT. After a bad month, I start wondering if I should have done something different. The five-year trajectory has not changed. My strategy has not changed. The only thing that changed is the “end” point, and my brain is treating that as the verdict on the entire experience.

You forget the boring middle

This is the most damaging distortion. The vast majority of your time as an XEQT investor consists of unremarkable days. Days where the price moves 0.1% up. Days where it moves 0.2% down. Days where nothing happens at all. These are the days that actually build wealth through compounding, and they are completely invisible to the peak-end rule because they produce zero emotional intensity.

Think about it: can you name a single “average” day in your investing history? A day where your portfolio moved a modest amount in either direction and you felt… nothing? Of course you cannot. Those days do not form memories. But they form returns.

Duration neglect makes crashes feel as big as bull markets

Here is where it gets truly insidious. The peak-end rule comes packaged with duration neglect – your brain’s tendency to ignore how long an experience lasted. A three-week crash feels roughly as significant as a three-year bull market in your memory. The crash is vivid and compressed; the bull market is vague and stretched out.

The March 2020 crash lasted about three weeks from peak to trough. The recovery and subsequent bull run lasted years. But in your memory, those three weeks might take up as much mental real estate as the three years that followed. Duration neglect ensures that brief, intense events punch far above their weight in your retrospective evaluation.

Here is a way to visualize the gap between what you remember and what actually happened:

Look at that table. Roughly seven months of drama. Seventy months of invisible wealth building. And your brain treats the seven months as the main story.

Why This Matters for XEQT Investors

You might be thinking: “Okay, so my memory is a little skewed. So what? I’m not selling. I’m holding for the long term.” And that is great. But the peak-end rule does more than just distort your memories. It actively shapes your investment behaviour and your emotional relationship with your portfolio.

It makes you think investing is scarier than it is

If your mental highlight reel of investing is a sequence of crashes, corrections, and stomach-dropping red days, then investing feels dangerous. It feels like a constant battle. In reality, global equity markets have gone up roughly 70-75% of calendar years over the long term. The boring, positive days vastly outnumber the dramatic negative ones. But boring days do not make the highlight reel, so your subjective experience of investing is far more stressful than the actual data warrants.

I have talked to friends who are reluctant to start investing in XEQT because they “remember” how volatile the stock market is. What they are actually remembering is three or four dramatic events over a 20-year period. They are not remembering the 15+ years of steady gains. The peak-end rule has edited their mental movie to make the stock market look like a horror film, when the actual footage is mostly a pleasant documentary about compound interest.

It makes you undervalue XEQT’s steady performance

XEQT is designed to deliver broad, diversified, global equity returns over the long term. Historically, that looks something like 8-10% average annual returns. But here is the thing about 8-10% average annual returns: they do not create memorable peaks. A good year for XEQT is not the kind of thing you tell stories about at a dinner party. Nobody says “let me tell you about the time my XEQT position returned 11% last year.” It is the investing equivalent of a reliable car that always starts – deeply valuable, completely unmemorable.

Because XEQT does not create peaks, the peak-end rule has nothing exciting to grab onto. Your memory of holding XEQT becomes a vague sense of “it was fine, I guess” – which dramatically undersells the reality of steadily building significant wealth over time.

It biases you toward exciting, volatile investments

Individual stocks create incredible peaks. Shopify going from $30 to $2,200. GameStop’s meme stock explosion. Nvidia tripling in a year. These peaks are seared into your memory, and the peak-end rule makes them feel like the essence of those investment experiences.

Meanwhile, XEQT’s memory profile is flat. No dramatic peaks. No unforgettable moments. Just steady compounding. This makes individual stock picking feel more significant than it objectively is, and it makes XEQT feel less significant than it objectively is. The peak-end rule essentially penalizes boring, consistent investments and rewards volatile, exciting ones – which is the exact opposite of what your portfolio needs.

It makes you vulnerable to recency bias

The “end” effect of the peak-end rule works hand-in-hand with recency bias – the tendency to overweight recent events when making decisions about the future. If XEQT had a bad last quarter, the peak-end rule makes that bad quarter feel like the summary of your entire investment experience, while recency bias makes you believe the bad quarter will continue. The two biases feed each other, creating a compounding distortion that can make you feel terrible about a portfolio that has performed excellently over any reasonable time horizon.

I wrote about recency bias and XEQT in detail if you want to explore that connection further.

The Peak-End Rule vs the Availability Heuristic

If you have been reading this blog for a while, you might be thinking: “This sounds a lot like the availability heuristic.” And you are not wrong – the two biases are related. But they operate on different psychological mechanisms, and understanding the distinction matters.

The availability heuristic answers the question: “How likely is X?” Your brain estimates probability by checking how easily you can recall examples. Crashes are vivid and easy to recall, so you overestimate how often they happen. Boring years are hard to recall, so you underestimate their frequency. The availability heuristic distorts your prediction of future events.

The peak-end rule answers a different question: “How was experience Y?” When you look back on your time as an XEQT investor, your brain evaluates the overall experience by pulling up the most intense moment and the most recent moment. It does not estimate probabilities – it constructs a retrospective evaluation. The peak-end rule distorts your memory and judgment of past experiences.

Both biases are at work when you evaluate your XEQT position. The availability heuristic makes you think crashes are more common than they are. The peak-end rule makes you remember your investing experience as more dramatic and unpleasant than it actually was. Together, they create a double distortion: you overestimate the likelihood of future pain AND you overestimate the amount of past pain you experienced.

If you want a deeper dive into the availability heuristic specifically, I covered it in The Availability Heuristic and XEQT.

Real-World Examples From the Canadian Market

Let me make this concrete with three scenarios that illustrate how the peak-end rule plays out in real Canadian investing lives.

The 2019-2024 XEQT investor

Imagine you bought XEQT in early 2019 and held it through the end of 2024. Over that period, your total return was somewhere in the neighbourhood of 55-65%, depending on timing and dividends. That is a genuinely excellent result – especially for doing nothing more complicated than buying and holding.

But when you look back on that period, what does your brain serve up? Peak negative: the March 2020 crash, when your portfolio was down 30% and the world seemed to be ending. Peak positive: maybe the late 2023 rally, when global equities surged. End: wherever the market landed at the end of 2024.

What does your brain skip? The quiet stretch from mid-2020 through late 2021 where your position steadily climbed. The first half of 2023 where the market recovered from the 2022 bear and you barely noticed. The dozens and dozens of unremarkable months that generated the bulk of your actual returns. The ~60% total return over the period barely registers emotionally, because it was built from hundreds of forgettable days.

The friend who bought Shopify

We all know someone like this. They bought Shopify at $30 on the TSX back in 2015 or 2016. They watched it climb all the way to its peak near $2,200 in late 2021. Then they watched it collapse to under $500.

Ask them about their Shopify experience and they will tell you two things: the euphoria of watching it hit $2,200 (peak positive), and wherever it is now (end). They will not tell you about the 300+ days of sideways trading between 2018 and 2020 that made them anxious and second-guess the position. They will not mention the months where nothing happened. The peak-end rule has compressed their entire multi-year Shopify experience into two data points: the high and the current price.

This makes the Shopify experience feel more significant than holding XEQT, even if the XEQT position performed just as well or better on a risk-adjusted basis. Individual stocks create dramatic peaks. XEQT creates wealth. Your brain remembers the drama more than the wealth.

Your own experience

Try this right now. Think about the worst day your portfolio has ever had. You can probably recall it with some specificity – the date, the feeling, maybe even what you were doing when you checked.

Now try to recall a single “average” day. A day when your portfolio moved half a percent in either direction and you felt nothing in particular.

You cannot do it, can you? I certainly cannot. And that asymmetry is the peak-end rule in action. The intense moments are recorded in high definition. The ordinary moments – the ones that actually generate your long-term returns – are not recorded at all.

5 Strategies to Counteract the Peak-End Rule

Understanding the peak-end rule is the first step. But understanding alone does not neutralize a cognitive bias. You need practical systems that counteract it. Here are five strategies I use and recommend.

1. Track cumulative returns, not daily moves

When you look at your portfolio through the lens of daily or weekly performance, you are giving the peak-end rule maximum ammunition. Every spike and every dip becomes a potential “peak” that will dominate your future memory.

Instead, train yourself to look at cumulative returns since inception. This is the “total gain/loss” number, and Wealthsimple’s dashboard shows it prominently. When you see that your XEQT position is up $12,000 since you started investing – regardless of what happened last Tuesday – you are bypassing the peak-end distortion. The cumulative number tells the real story, and it is almost always a better story than the daily noise suggests.

2. Keep an investing journal

This might sound unusual, but it is one of the most powerful antidotes to the peak-end rule I have found. The idea is simple: on random, uneventful days, write down how you feel about your portfolio. Not on crash days. Not on euphoric rally days. On boring, forgettable Wednesdays.

“June 8, 2026. XEQT up 0.1% today. Portfolio looks fine. Nothing exciting happening. Contributed my usual $500 this month.”

These entries create a written record that counteracts your brain’s peak-obsessed memory. When you look back in a few years and read through your journal, you will see that 90% of your entries describe quiet, uneventful, perfectly fine days. That is the true experience of investing – and your journal preserves it when your memory will not.

3. Review annual returns, not monthly

Monthly returns are volatile enough to create memorable peaks. Annual returns are much more consistent. When XEQT returns 10% one year and 8% the next and 12% the one after that, the experience looks steady and predictable. When you zoom in to monthly returns and see +3%, -5%, +4%, -2%, +6%, it looks like a roller coaster.

Same investment. Same returns. Completely different narrative depending on the zoom level. Choose the zoom level that gives you the most accurate picture, which is almost always the annual view. The monthly view creates artificial peaks that the peak-end rule will latch onto and distort.

4. Celebrate the boring months

I have started doing something that my friends find a little strange: I acknowledge the boring months. When I check my portfolio and nothing dramatic has happened – XEQT is up a percent or two, my automatic contributions went through, the dividends were reinvested – I take a moment to recognize that this is actually the ideal outcome.

Every uneventful month is a month where compounding did its work without interference. No panic selling. No emotional decisions. No drama. Just steady growth. Those months deserve recognition precisely because your brain will not give them any. They are the unsung heroes of your financial future, and the least you can do is notice them while they are happening.

5. Automate and stop watching

The peak-end rule can only distort experiences you are consciously paying attention to. If you automate your XEQT contributions through Wealthsimple’s recurring investment feature and check your portfolio quarterly at most, you are dramatically reducing the number of “peaks” your brain has access to.

Think about it: if you check your portfolio daily, you experience roughly 250 potential peaks per year. If you check quarterly, you experience 4. Fewer peaks means less raw material for the peak-end rule to work with, which means your retrospective evaluation of your investing experience will be closer to reality.

I moved to quarterly check-ins about two years ago, and the effect on my emotional relationship with investing has been profound. I no longer feel like investing is a series of crises punctuated by brief calm. It just feels like something that is quietly happening in the background, growing steadily, which is exactly what it is.

Why XEQT’s Boringness Is a Feature

I want to end with something that took me years to fully internalize: the best investment is the one you barely remember holding.

Exciting investments create peaks. Peaks distort your judgment. Distorted judgment leads to bad decisions – panic selling, performance chasing, overtrading, strategy hopping. The more memorable your investment experience, the more likely it is that your brain’s highlight reel will eventually convince you to do something you will regret.

XEQT is designed to be forgettable on any given day. That is not a flaw. That is the entire point. A globally diversified, automatically rebalanced, low-cost equity ETF is optimized for long-term wealth building, not for creating memorable investment moments. It will never be the stock you tell war stories about. It will never make you feel like a genius at a dinner party. It will just quietly compound, year after year, in the background of your life.

The peak-end rule wants you to judge XEQT by its worst crash and its most recent quarter. The reality is that XEQT should be judged by the decades of boring, steady, unremarkable growth that your brain will never bother to record. Those invisible days are doing all the work. Those invisible days are building your retirement. Those invisible days are the actual story of your investment journey, even though your memory will try to tell you otherwise.

Your brain wants excitement. Your portfolio wants boredom. Every time you catch yourself reaching for the highlight reel – the crashes, the rallies, the recent quarter – remind yourself that the real story is the one your brain threw away. The forgettable months. The unremarkable years. The quiet, invisible magic of compound growth.

That is the experience worth having. Even if you will not remember it.

Related Reading

• The Availability Heuristic and XEQT
• Recency Bias and XEQT
• Loss Aversion and XEQT
• Your First Market Crash as an XEQT Investor
• The XEQT Investor’s Guide to Financial News

Disclosure: This post contains referral links. I may receive compensation if you sign up. The peak-end rule research cited is from Daniel Kahneman and colleagues, published in various works including ‘Thinking, Fast and Slow’ (2011).