The red-day instinct is
the expensive one.
Selling into a fall does two kinds of damage. It books the loss, and it points you exactly the wrong way, because the hole gets steeper to climb the deeper you let it dig.
| The fall you sell into |
Gain to get back to even |
| Down 20 percent | 25.0 |
| Down 30 percent | 42.9 |
| Down 50 percent | 100.0 |
Investors rescore themselves more cautious after a crash even when wealth, income and goals have not moved an inch. Fear does it, not the math. And that mistimed exit and re-entry has cost roughly 15 percent of the return the funds actually delivered.