SHREWD IDEAS

FINANCIAL PLANNING HACK

When markets fall, many of us feel panicky and want to sell.

That’s normal. Losing feels twice as bad as gaining feels good and it happens three times as fast.

This is made worse by watching the financial media, who profits from your fear.

So even if we know better, we act on fear.

But once you sell, that loss often becomes permanent.

Here’s the problem:

• Panic selling locks in your losses. Then markets often bounce quickly.

• After big dips like in 2008 or 2020, long-term investors who stayed in did better than those who sold in fear

• A Business Insider piece reported that investors who sold when the S&P dropped nearly 20% missed the rebound that followed

Panic sellers tend to sell too late and buy back in even later (loss avoidance bias).

Forget trying to catch the bottom because nobody really can.

No matter what your strategy is, you must stick to it.

If you bought the position for the long term, leave it in for the long term.

If you intended to trade market swings, you are probably already out before everyone else panicked.

What works is sticking with your strategy, even when your body screams not to.

Rule 1: Stick To Your Strategy

If you are a long-term investor, panic selling isn’t part of your investment strategy.

You do have a written investment plan, don’t you?

Is there a line in your investment strategy that says:

*Follow this strategy unless the market goes down and you get scared?

If you are a short-term trader, you definitely have a set of rules you are following.

Why would market conditions change that?

Either you have bad rules that only work during strong bull markets or you’re foolishly breaking your rules.

Assume that you created your investment strategy with a clear head and that today’s emotional state that’s telling you to sell is the problem.

After all, making emotional decisions with your money is rarely the right move.

No one knows that more than crypto traders.

Just look at old posts on https://www.reddit.com/r/Bitcoin/ from 2022. People were ready to jump off a cliff after Bitcoin crashed from $65k to $16k.

But today, Bitcoin is at $117k and is in a strong uptrend.

Those who sold at the bottom and stayed out missed out on a +731% return over the next few years.

Forget about timing the bottom

Missing the absolute lowest point isn’t the issue.

Missing the bounce is.

If you’re in, you earn back the drop and then some.

If you can do this one thing, you avoid the biggest regret during market dips. No complicated strategy, no second-guessing.

A simple rule to help you stay on track.

And if you’ve already sold?

You might be able to use those losses to lower your taxes.

I’ll break that down in next week's newsletter.

Talk soon,
Josh

P.S. If you’d like us to break down your portfolio or ask a question, submit yours here: https://shrewdinvestor.com/roastme

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The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.

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