Why Smart People Make Bad Investment Decisions Under Stress

05/04/26

Turn on the news on any given day, and you're likely to be met with bold, alarming headlines. That kind of noise has a way of steering our minds toward panic before we've even had a chance to think things through.

And when it comes to money, panic is expensive.

We've all worked hard for what we've saved. The thought of losing it, even temporarily, can feel stressful. So when the market drops and the headlines get louder, it's completely natural to want to do something.

The two most common moves I see are selling out of investments entirely, or shifting into something so conservative that when the market recovers, you're not positioned to recover with it.

Both feel safe in the moment. Neither tends to serve you well in the long run.

How to Avoid This

The antidote isn't to ignore your instincts; it's to have a plan in place before the stressful moment arrives. Here are a few ways to stay grounded when markets get rocky:

1. Dollar cost average. If possible, contribute to your investments the same amount of money on the same schedule every month, regardless of what the market is doing. When the market dips, that consistent contribution buys more shares at lower prices, bringing your average cost per share down. That's a meaningful advantage when the market swings back up.

If this doesn’t make sense, think of it like buying groceries for your family each week. You might spend $300 the first week. But you might only spend $250 during the second week because of sales. Buying items at lower prices lowers the average cost of groceries per week (YAY!).   

2. Remember your timeline. A down market looks very different depending on when you need the money. If retirement is still years away, short-term volatility matters a lot less than it feels like it does in the moment. If retirement is around the corner, prepare NOW; don’t wait for the market to blindside you.

3. Lean on your plan. When your financial strategy is built around your actual goals, it becomes a lot easier to look at a down market and say “this was already accounted for “rather than reaching for the eject button.

That's a big part of what we do together. We don’t just build a plan for the good times, but we build one that holds up when the headlines are scary and your gut is telling you to run.

Do you have questions about how your portfolio is positioned for volatility? Let's talk.

*Do not use this as advice about your specific situation. Please contact me to talk about your specific situation. You are never charged for meetings or advice.