Thirty thousand euros disappeared on the screen
In March 2020, I watched my portfolio fall from roughly €90,000 to €60,000 in one afternoon. I called my wife and told her I needed to sell before the portfolio went to zero.
The market was falling. My story was falling faster
I knew the theory. I knew that selling during a crash can turn a temporary decline into a permanent loss. None of that knowledge stopped the feeling. The brain was reacting to the number on the screen as if the danger were immediate.
Loss aversion changes the experience
Behavioural finance gives that reaction a name. Losses tend to feel more painful than equivalent gains feel rewarding. During a crash, the emotional weight of the loss can make the future look worse than the available evidence supports.
One question interrupted the panic
My wife asked: do you think it is actually going to zero? I did not have an immediate answer. The question forced me to distinguish between a falling market and the story my mind had created about where the fall would end.
The lesson was not to ignore risk
The lesson was to create a decision process before the next crash. What would make the investment thesis wrong? What has actually changed? What am I reacting to: the asset or the price? A system cannot remove uncertainty, but it can prevent one frightening afternoon from rewriting the entire plan.
The lesson was to create a decision process before the next crash. What would make the investment thesis wrong? What has actually changed? What am I reacting to: the asset or the price? A system cannot remove uncertainty, but it can prevent one frightening afternoon from rewriting the entire plan.
This essay is the deeper story behind NobodyToldMike Episode 16.
Watch the episode →Educational content only. This essay is not financial advice. Financial decisions depend on your circumstances, goals and risk tolerance.