I donāt trust any investing strategy I havenāt tested against my own panic. š Turns out thereās science behind that instinct. Kahneman and Tversky found that losses hit us roughly twice as hard as equivalent gains feel good. So when the market drops and you feel like itās the end of the world? Thatās not drama, thatās your nervous system doing exactly what itās wired to do. Hereās the part nobody tells you: the āperfectā portfolio on paper is worthless if you canāt actually hold it. Iāve watched people build beautifully optimized portfolios, then sell everything the second things got scary, locking in losses right before the recovery. The math was right. The human wasnāt ready. So now I ask a different question before investing in anything: not āwhatās the highest return?ā but ācan I actually sleep at night holding this?ā Your body answers that faster than any risk questionnaire. Tight chest, checking your phone every 20 minutes, thatās not weakness, thatās information. š«
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18 Comments
Catherine @ffcatherine Ā· 20h
We are all human & itās true that the hardest part of investing is doing nothing . If you ask me if Iāll panic when we get a really big crash Iām not sureā¦ however having another bucket I can withdraw from in that case should help me do nothing.., But only time will tell
Lindsay Ross@laross19 Ā· 20hEdited
Great post as always Lisa. Hope you're doing well. I really appreciate how your comments are for regular people.
Dividending @dividending Ā· 19h
Great post! This is such an important aspect of successful long term investing. The behavioral gap is real. I was recently asking the die hard index ETF investors about their real world returns because, although financial academic literature shows the value of index ETF investing, back testing in sterile conditions does not capture the returns of real investors with real emotions. Iām not saying that stock picking, day trading or an other strategy is better just that every strategy that works well during time of peace can destruct during times of war, uncertainty and investor reactivity. Mike Tyson said it best ā Everybody has a plan until they get punched in the mouthā.
Brennen Maxwell@mclovinvl Ā· 16h
Iam starting to see this more and more that panic selling is a real thing. They donāt teach this in school and parents were zero help investing wise.
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