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10 crashes since 1929. 10 recoveries. Average investor: 3.6%. S&P 500: 10%. Gap = emotions.
Panic selling during crashes is a costly error: the S&P 500 has crashed 30%+ ten times since 1929, recovering each time in an average of 3.3 years. During the March 2020 COVID crash, investors who sold at a 34% drop missed a 70% recovery within 12 months. Behavioral finance research (Kahneman & Tversky, 1979) shows losses feel 2.5x more painful than equivalent gains, driving emotional decisions. This is worse than #4’s stock chasing because Dalbar studies reveal the average investor earns just 3.6% while the S&P 500 earns 10%—the entire gap stems from emotional trading. Automating investments and deleting brokerage apps during downturns prevents this 6.4% annual loss.
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