Why do investors have a hard time doing nothing?

tvubpwcisla · Post by **tvubpwcisla** » Sat Apr 25, 2020 5:58 am

One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

taojaxx · Post by **taojaxx** » Sat Apr 25, 2020 6:04 am

Human nature: Millions of years have hard wired our brains to feel the urge to "do something" when stuff happens. That, coupled to recency bias: mental image pops up of whatever just happened being deemed to continue. Crash will get worse or the opposite, as in performance chasing.

bgf · Post by **bgf** » Sat Apr 25, 2020 6:19 am

It is part human nature, but there are also things you can do to avoid it. In my experience, having a plan that requires action begets action. Decisions beget decisions. Optimization begets yet more attempts at optimization.

Having a plan that requires little, if any, action/decision-making greatly reduces the risk of misbehaving. It doesnt eradicate the risk entirely of course.

The ideal solution for me would be an automated portfolio of the 4 funds used in Vanguard target date funds. These would be automatically rebalanced daily and tax loss harvested in my taxable account. The cost of this service would be free.

We don't live in an ideal world so the next best thing is just using the target date fund. For others the next best thing is handling a 2 or 3 fund on their own.

Yet others have 5-10+ funds...

As you increase the number of funds that you handle, i think the risk of misbehaving increases

nisiprius · Post by **nisiprius** » Sat Apr 25, 2020 6:49 am

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

How long have you been investing? Have you tried? What has your own experience been?

I think there are many obvious reasons.

1) This forum includes a good cross-section of investing opinion. If we set aside questions of "but who is actually right?" and "what percentage of forum participants think so?", it is obvious that many Bogleheads forum participants do not believe in doing nothing. Many investors believe in various degrees of stock-picking and market-timing.

2) At any given instant in time, it is always easy to see that there are things you could have done that would have been better than what you did. And not just a little better, but a lot better. It's in the very nature of the amount of risk in the stock market and the sheer size of stock market fluctuations.

3) The pattern of price movements in the stock market is chaotic, fractal. There are ups within the downs, there are smaller downs within those ups, and so on. It is virtually impossible for the human mind not to think it is seeing patterns in them, just as it is virtually impossible not to see "pareidolia," animal shapes in clouds, the man (or the rabbit or the woman carrying a bundle) in the moon, and so on. After the fact we look at long-term charts that hide even monthly fluctuations, let along daily or hourly, and see "a bear market" and forget what it looked like while it was happening. For example, it is surprisingly common to think that the great bull market of 2009-2019 was nothing but steady, solid gains.

4) What is the self-interest of the people in an industry who are willing to advertise? Most of it is to get you to change, and to tempt you by offering something new. What is the self-interest of, let's say a magazine like Kiplinger's Personal Finance, or CNBC, or brokerage publications like Schwab's OnInvesting? They want something fresh and new all the time. A good portion of everything you see or read about investing is coming from people whose salary depends on convincing investors not to stay the course. Half of what you near from friends and acquaintances based on their reading and believing those things.

How about a financial advisor? Rick Ferri I believe has struggled with this personally. A traditional advisor needs to charge something like $100-$300 an hour to make a business out of it... or an annual fee of 1% of your account. How many people are willing to pay hundreds or thousands of dollars every year to get told "eh, just keep doing what you've been doing?" "What, don't you have any ideas for anything I can do better?" "Naaah, nobody really knows that much, you've got a decent portfolio there, it's good enough, leave it alone?"

5) In a sense I agree with you, because for me it is hard to understand why people will gamble at casinos. One of the most puzzling cases for me are slot machines--physical and online--where the mechanism is invisible and you don't have even the illusion of being able to visually verify that the machine is fair. In many cases, people will play slot machines even when the return-to-player percentage is known publicly. But in any case players know that it isn't 100%, let alone more than 100%.

6) Both indexing and staying the course involve admitting an inability to predict the future, and a willingness to accept knowing that the portfolio we hold is not the optimum. Everyone just plain hates not being able to see what is coming, even when intellectually we know it is true. How many times have you wanted to know "when the pandemic will be over," for example?

7) Fred Schwed wrote in 1940:

Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature.... No description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.

Samuel Butler wrote in the 1870s:

...money losses are the hardest to bear of any by those who are old enough to comprehend them.... Suicide is a common consequence of money losses; it is rarely sought as a means of escape from bodily suffering... the three most serious losses which a man can suffer are those affecting money, health and reputation. Loss of money is far the worst, then comes ill-health, and then loss of reputation...

Chicken Little · Post by **Chicken Little** » Sat Apr 25, 2020 6:50 am

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Well, you propose x and then y, but then go on to specify "cashing out".

What about those who were fully invested who bought more stocks with bond money when the market sharply declined?

What if X = "when market sharply declines" and Y = "buy more stock"?

Can you not prepare for a financial crisis? When do you prepare for a financial crisis? My preparations for the next one have already commenced (10 +/- 5 years is my guess, cause is irrelevant).

What about rebalancing? That's not nothing.

Is anything OK if you wrote it down before hand? Incidentally, if you have purpose in a crash (Buffet is often quoted), and can execute (probably hard to execute if you don't truly expect a crash and have assets with which to buy), trying to write a document to cover crashes may just handcuff you. If a band strategy is too simple, you could nickle-dime yourself on way down with narrow bands, just miss a wide band at very low valuations, or miss an opportunity entirely based on time interval (month, quarter, year).

What if somebody moved from 40/60 to 60/40 in March? What if the action is completed, not part of a plan?

Why muddy the water? If somebody is smart enough to recognize that they either don't want to drive, or can't drive, then why not go driverless with a Target Date or similar option? Why have two or three or four funds when one will do? Why bother to write a few things down on one piece of paper when the Target Date fund wrote much more down on many more pieces of paper for you?

whereskyle · Post by **whereskyle** » Sat Apr 25, 2020 6:51 am

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

We think we're in control. Or we just desperately want to be.

Olemiss540 · Post by **Olemiss540** » Sat Apr 25, 2020 7:14 am

I think it is hard to settle for "average" returns even though those returns would be better than 80% of portfolios over the long term. They see things with the benefit of hindsight and fail to realize past performance is not a forward indicator, and many times it's quite the opposite.

This is why target date funds are such a valuable investment tool. It promises average market returns, low costs, and helps mitigate the behavioral mistakes that even the most veteran bogleheads have been unable to resist (performance chasing, market timing, stock picking, etc).

Part of the reason for the desire to do something IMO is that the news creates an aura of fear and uncertainty even bigger than news events themselves (from a historical perspective) as a means to sell viewership.

DarkHelmetII · Post by **DarkHelmetII** » Sat Apr 25, 2020 7:17 am

Olemiss540 wrote: ↑Sat Apr 25, 2020 7:14 am Part of the reason for the desire to do something IMO is that the news creates an aura of fear and uncertainty even bigger than news events themselves (from a historical perspective) as a means to sell viewership.

+1

midareff · Post by **midareff** » Sat Apr 25, 2020 7:25 am

When in doubt it is relatively easy to revert to the words (hope I remember it correctly) of wisdom spoken by the Oracle..... it strikes me as an intelligent course of action to do nothing. No quote's deleted since I'm not quite sure of exact words and placement.

goblue100 · Post by **goblue100** » Sat Apr 25, 2020 7:30 am

nisiprius wrote: ↑Sat Apr 25, 2020 6:49 am How long have you been investing? Have you tried? What has your own experience been?

Nsi,
I just wanted to thank you for taking the time and making to write such insightful posts. I always enjoy them.

My own answer to the OP is that I have done a pretty good job of doing nothing throughout this crisis, but that doesn't mean I wasn't kicking myself really hard when the market was at it's lowest. I think this is the thing that really gets investors in trouble, as they decide they don't want any more of this pain right at the point where things are ready to stabilize.

Triple digit golfer · Post by **Triple digit golfer** » Sat Apr 25, 2020 7:38 am

Write an IPS and follow it. Then you're not doing nothing. You're following your IPS, which probably has you doing nothing.

amp · Post by **amp** » Sat Apr 25, 2020 10:10 am

Olemiss540 wrote: ↑Sat Apr 25, 2020 7:14 am I think it is hard to settle for "average" returns even though those returns would be better than 80% of portfolios over the long term. They see things with the benefit of hindsight and fail to realize past performance is not a forward indicator, and many times it's quite the opposite.

I think there are a lot of folks out there who feel they've done well in life by just working harder and pushing themselves a bit more than the average person. Telling someone who's wired to be competitive that they are just going to get market returns will disconcert them. You might as well tell them they will get C's in school, get a 'Meets Expectations' on their annual review, run a five hour marathon, etc.

They figure that there's got to be an edge and if they just hustle a little bit more, they will find it.

Olemiss540 · Post by **Olemiss540** » Sat Apr 25, 2020 11:36 am

amp wrote: ↑Sat Apr 25, 2020 10:10 am
Olemiss540 wrote: ↑Sat Apr 25, 2020 7:14 am I think it is hard to settle for "average" returns even though those returns would be better than 80% of portfolios over the long term. They see things with the benefit of hindsight and fail to realize past performance is not a forward indicator, and many times it's quite the opposite.
I think there are a lot of folks out there who feel they've done well in life by just working harder and pushing themselves a bit more than the average person. Telling someone who's wired to be competitive that they are just going to get market returns will disconcert them. You might as well tell them they will get C's in school, get a 'Meets Expectations' on their annual review, run a five hour marathon, etc.

They figure that there's got to be an edge and if they just hustle a little bit more, they will find it.

Logical, and good point, but I dont think that's the majority of the cause. I think it stems from the same brain endorphins or stimulants that are the cause for why people (even knowing the odds are against them) continue to gamble in casinos or play scratch offs. It's the thrill or rush they get from the daily movement of the prices. It's the search for an outlet or release in part that seems justified because its "investing" and not "gambling".

Fat-Tailed Contagion · Sat Apr 25, 2020 11:44 am

Most people that have problems don't have a pre-determined Asset Allocation and Rebalancing strategy in place.

Without that, one could rationalize making changes every day.

cs412a · Post by **cs412a** » Sat Apr 25, 2020 11:49 am

We're wired to respond to change, and when something bad happens, the "fight or flight" response goes into high gear.

I have been doing nothing during this downturn. Maybe that's because I'm rational, but it also could be because I'm frozen into inaction, like a deer caught in the headlights.

7eight9 · Post by **7eight9** » Sat Apr 25, 2020 12:02 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Most who got out in February are thrilled that they avoided a significant selloff.

Olemiss540 · Post by **Olemiss540** » Sat Apr 25, 2020 12:27 pm

7eight9 wrote: ↑Sat Apr 25, 2020 12:02 pm
tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?
Most who got out in February are thrilled that they avoided a significant selloff.

But MOST didnt get out in February.

tibbitts · Post by **tibbitts** » Sat Apr 25, 2020 12:51 pm

Reading Bogleheads, we always get more/different information - the latest thinking on tilts, international, etc. It's difficult to react, and maybe not necessarily wise not to. Even the most stay-the-course Bogleheads sometimes waver in the face of ... well bonds yields being at historic lows for example.

adamthesmythe · Post by **adamthesmythe** » Sat Apr 25, 2020 1:06 pm

I guess I'm not an investor because I don't have any trouble doing nothing.

LilyFleur · Post by **LilyFleur** » Sat Apr 25, 2020 2:44 pm

tibbitts wrote: ↑Sat Apr 25, 2020 12:51 pm Reading Bogleheads, we always get more/different information - the latest thinking on tilts, international, etc. It's difficult to react, and maybe not necessarily wise not to. Even the most stay-the-course Bogleheads sometimes waver in the face of ... well bonds yields being at historic lows for example.

Exactly.

NotWhoYouThink · Post by **NotWhoYouThink** » Sat Apr 25, 2020 3:18 pm

People who accumulate enough money to invest have a bias to action. Not acting feels weird to them.

acegolfer · Post by **acegolfer** » Sat Apr 25, 2020 3:26 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am I see a lot of smart investors talk about when the market does x, I'm going to do y.

This is what we call a sample bias. The smart investors who do nothing don't talk so you will not see them.

Fallible · Post by **Fallible** » Sat Apr 25, 2020 3:32 pm

Investors have a hard time because doing nothing is NOT doing nothing. Nothing is about doing some of the hardest things in investing: staying the course by achieving and maintaining self-discipline, emotional control, and patience during market volatility, historic crashes, and even historic bull markets. Doing nothing goes against our natures to react when fearful or greedy. It's true of life in general, but especially with money and the fear of losing it. Doing nothing is the "not easy" part of Warren Buffett's famous quote, often repeated by Jack Bogle: "Investing is simple, but it's not easy."

KEotSK66 · Post by **KEotSK66** » Sat Apr 25, 2020 3:47 pm

bgf wrote: ↑Sat Apr 25, 2020 6:19 am It is part human nature, but there are also things you can do to avoid it. In my experience, having a plan that requires action begets action. Decisions beget decisions. Optimization begets yet more attempts at optimization.

Having a plan that requires little, if any, action/decision-making greatly reduces the risk of misbehaving. It doesnt eradicate the risk entirely of course.

The ideal solution for me would be an automated portfolio of the 4 funds used in Vanguard target date funds. These would be automatically rebalanced daily and tax loss harvested in my taxable account. The cost of this service would be free.

We don't live in an ideal world so the next best thing is just using the target date fund. For others the next best thing is handling a 2 or 3 fund on their own.

Yet others have 5-10+ funds...

As you increase the number of funds that you handle, i think the risk of misbehaving increases

couldn't have said it better myself

windaar · Post by **windaar** » Sat Apr 25, 2020 4:46 pm

It is hubris that makes many feel that they are smarter than other people, and that they have an edge when market events happen. And they don't understand how the market is way ahead of their schemes. Example: A friend recently told me that alcohol sales are way up during the lockdowns, so he bought stocks in liquor/beer companies. OK....

BrownEyedGirl_27 · Post by **BrownEyedGirl_27** » Sat Apr 25, 2020 5:06 pm

1. Investing the Boglehead way is largely boring. Most of us aren’t picking individual stocks, so it’s much less exciting. I’m a young investor and have only had to fix my allocation twice (got rid of bonds and REITs). Rebalanced once which was almost fun. I’m bored now! Because this is an advice forum, it can cause people to tinker unnecessarily with their portfolios whilst giving advice to others.

2. When we read forums like Bogleheads and see people panicking and moving their money to cash in uneasy times like this, it’s hard not to follow the herd. Our pulse quickens while we keep reading posts like this. Our money becomes emotional, the exact opposite of how money should be handled. You wonder why you shouldn’t also do something when you see others talking about their deep losses, wonder what do they know that I don’t?

Stay the course. Have an ISP. Ask the forum members for advice before you make any big money moves that you’re questioning. Provide advice on subjects you know about. And that’s how it’s done.

sschullo · Post by **sschullo** » Sat Apr 25, 2020 6:14 pm

adamthesmythe wrote: ↑Sat Apr 25, 2020 1:06 pm I guess I'm not an investor because I don't have any trouble doing nothing.

Yeah, in fact, I don't like investing except I do enjoy the benefits of low costs and feel the quietness of turning off all of the TV financial noise machines.

Paradise · Post by **Paradise** » Sat Apr 25, 2020 8:12 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

You’re probably referencing something different, but if you have money in the market and don’t have thoughts over “when the market does x, I’m going to do y,” in my opinion you are doing something wrong. Not a single action planned against a market move? No rebalance? Ever?

I am a boring long term investor, but even I have recently charted out all rebalances ahead of time because in high volatility situations, you don’t always have hours or days to do the math.

jb1 · Post by **jb1** » Sat Apr 25, 2020 8:14 pm

I did something and bought more.

SteadyOne · Post by **SteadyOne** » Sat Apr 25, 2020 8:35 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Illusion of control

Normchad · Post by **Normchad** » Sat Apr 25, 2020 8:54 pm

I had no problem staying the courses, never have had a problem with it. My resolve is buoyed, strengthened, and encouraged by the daily work I put in on these forums and elsewhere. I believe I know what I’m doing and why I’m doing it. I am very confident of my plan

In my personal experience, I only know one other person who has a good grasp on investing.

My theory is that most market participants do not have an even rudimentary understanding of investing. It’s good that they participate in their 401ks. How many understand what is in their funds? How many know the difference between stocks and bonds? I’ve met many other wise smart people who truly view “the market” as a rich mans casino.

If that is your intellectual underpinning, you are very prone to “do something” every time somebody says you should, or that things are tanking, etc.

So that’s my answer. People don’t understand what they’re doing.....

arcticpineapplecorp. · Sat Apr 25, 2020 9:00 pm

great posts all. I haven't read Robert Schiller's latest book on Narrative Economics but I've heard him in a couple interviews to think there's probably something to that. We like to tell and listen to stories. It guides us. It's how we learn. We tell stories not just on a macro level, but also a micro level as well.

The other thing people don't seem particularly good at is critical thinking. Asking questions. Using logic. And so on. Here's an example with both of these elements.

I remember in 2008 when the market seized up I sat across from a coworker who had her "I can't stand it anymore" moment. She sold all her stock holdings and went to cash completely. The market had already fallen 30 or 40 percent and she cashed in her chips. I'm sure she wasn't the only one. However, it was sad to see because she was in a job that was resistant to the recession (she administered medicaid benefits and the need only grew at that time). She was also 20 years from retirement. And she hadn't enough to retire before the recession, so then in 2008 she had even less (so what choice was there to continue investing, staying the course, buying and holding until she met her goal years from then)? But she didn't.

At the same time she told a story about how her husband had made "smart money moves" (her words). She didn't elaborate fully (I believe because she didn't understand what her hubby was doing, didn't want to know, or just couldn't articulate). But the gist was he supposedly sold soon after the market started going down (so he didn't get out before) and then bought back in at lower prices. Thing is, 2008 wasn't the bottom to buy back in. That would have been in March 2009. So his timing was not perfect. And he probably would have done better buying and holding because he missed out on dividends in the months he was out of the market (and he imperfectly timed).

I sat and thought for a minute about how without looking at the details and knowing exactly what he did and if it would've (or likely wouldn't have) beaten the market there's no way to know and that's the point. It made for a good story for her to tell about her husband's investing prowess, as compared to her own foibles.

Thing is, I also thought about how the two of them were not one unit in achieving a common goal (working towards retirement). They weren't applying the same principles of investing. It's not uncommon for couples to have different risk tolerances, but these two weren't on the same page with what they were doing with their investments. They both were market timing but in different ways. How does a couple achieve a common goal when both parties aren't working together to achieve them? Can they, except by accident?

Everyone loves a good story though.

arcticpineapplecorp. · Sat Apr 25, 2020 9:04 pm

an old Wall Street saying: “financial markets are driven by two powerful emotions – greed and fear."

does that answer it?

RudyS · Post by **RudyS** » Sat Apr 25, 2020 9:53 pm

7eight9 wrote: ↑Sat Apr 25, 2020 12:02 pm
tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?
Most who got out in February are thrilled that they avoided a significant selloff.

But the big question then becomes, "when do I buy back in?"

MathWizard · Post by **MathWizard** » Sat Apr 25, 2020 10:10 pm

Not everyone can sit on their hands. Somebody is doing the trading, it prices do not change.

I buy when I get paid, and I will be withdrawing in retirement.

I also rebalance, and sometimes change AA.

Why is this a bad thing, and why should you care?

I'm not sure why this question is even actionable

arcticpineapplecorp. · Sun Apr 26, 2020 11:18 am

MathWizard wrote: ↑Sat Apr 25, 2020 10:10 pm Not everyone can sit on their hands. Somebody is doing the trading, it prices do not change.

I buy when I get paid, and I will be withdrawing in retirement.

I also rebalance, and sometimes change AA.

Why is this a bad thing, and why should you care?

I'm not sure why this question is even actionable

I don't think the OP is talking about rebalancing. S/he's talking about people panicking and selling everything. getting out of the market. That's due to fear obviously.

I think the question is actionable because there are plenty of members here who ask market timing questions. And there are novices who haven't been through declines and don't have: 1. experience in this area, 2. knowledge of market history.

Two of William Bernstein's 4 pillars of investing are: 1. The history of investing, 2 The psychology of investing.

For those who have neither of these, they are likely to be poor at investing (pun intended).

montanagirl · Post by **montanagirl** » Sun Apr 26, 2020 11:40 am

Olemiss540 wrote: ↑Sat Apr 25, 2020 12:27 pm
7eight9 wrote: ↑Sat Apr 25, 2020 12:02 pm
tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?
Most who got out in February are thrilled that they avoided a significant selloff.
But MOST didnt get out in February.

It crossed my mind, to get out like I did in 2007. But back then I would have needed the money to live on, now I don't.

And back then I wasn't sure when to jump back in, things seemed so apocalyptic. Kinda like last month.

bi0hazard · Post by **bi0hazard** » Sun Apr 26, 2020 12:15 pm

This is an interesting article:

https://finance.yahoo.com/amphtml/news/ ... 48314.html

7eight9 · Post by **7eight9** » Sun Apr 26, 2020 12:21 pm

bi0hazard wrote: ↑Sun Apr 26, 2020 12:15 pm This is an interesting article:

https://finance.yahoo.com/amphtml/news/ ... 48314.html

Younger/poorer households bought equities. Older/wealthier households bought fixed income.

The majority of households making trades—about seven out of ten since February 19—have moved money into equities rather than into fixed income (bonds and cash). However, net money flow into fixed income since February 19 has been modestly positive (see Figure 2), indicating that households with the highest balances are moving away from equities. This suggests that older and/or wealthier households are more likely (by a small margin) to sell into stock market declines, while the typical household “buys on the dips.”

https://personal.vanguard.com/pdf/coron ... tility.pdf

The referenced Yahoo article is being discussed in this thread --- viewtopic.php?f=10&t=313155

FrugalInvestor · Post by **FrugalInvestor** » Sun Apr 26, 2020 12:25 pm

Because fight or flight is a natural response of humans, doing nothing is not natural. But that doesn't mean that when it comes to investing it's bad.

BV3273 · Post by **BV3273** » Sun Apr 26, 2020 12:38 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Because it’s boring or because they thought they were comfortable with the amount of risk they were taking on.

flyingaway · Post by **flyingaway** » Sun Apr 26, 2020 12:40 pm

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Because they think they are smarter than most of other people. If you were lucky, you made money by selling early in February.

hudson · Post by **hudson** » Sun Apr 26, 2020 6:18 pm

nisiprius wrote: ↑Sat Apr 25, 2020 6:49 am
7) Fred Schwed wrote in 1940:
Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature.... No description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.
Samuel Butler wrote in the 1870s:
...money losses are the hardest to bear of any by those who are old enough to comprehend them.... Suicide is a common consequence of money losses; it is rarely sought as a means of escape from bodily suffering... the three most serious losses which a man can suffer are those affecting money, health and reputation. Loss of money is far the worst, then comes ill-health, and then loss of reputation...

Great quotes!
These two quotes fit me in 2008.
Because of 2008, 2020 wasn't that bad.

arcticpineapplecorp. · Sun Apr 26, 2020 7:36 pm

FrugalInvestor wrote: ↑Sun Apr 26, 2020 12:25 pm Because fight or flight is a natural response of humans, doing nothing is not natural. But that doesn't mean that when it comes to investing it's bad.

there's actually fight, flight, and freeze.

considering investing in the stock market is nothing like being chased by an actual real-life lion, I'd say freeze is the better strategy.

smectym · Post by **smectym** » Mon Apr 27, 2020 2:58 am

taojaxx wrote: ↑Sat Apr 25, 2020 6:04 am Human nature: Millions of years have hard wired our brains to feel the urge to "do something" when stuff happens. That, coupled to recency bias: mental image pops up of whatever just happened being deemed to continue. Crash will get worse or the opposite, as in performance chasing.

Well if you’re retired, and you’ve got $1M sitting in your cool, low-cost Vanguard index fund, and that’s your retirement plan, and your spouse is all over you about it, and then there’s a COVID-19 type crash, I don’t think you need to know anything at all about whether or not our brains are millions of years hard wired to do this thing, that thing, or the other thing. You’re going to want to bail and scramble to cash. How many aeons did it take our brains to evolve to “Shoot first and ask questions later”? Or was that our brains before any evolution took place?

smectym · Post by **smectym** » Mon Apr 27, 2020 3:10 am

smectym wrote: ↑Mon Apr 27, 2020 2:58 am
taojaxx wrote: ↑Sat Apr 25, 2020 6:04 am Human nature: Millions of years have hard wired our brains to feel the urge to "do something" when stuff happens. That, coupled to recency bias: mental image pops up of whatever just happened being deemed to continue. Crash will get worse or the opposite, as in performance chasing.
Well if you’re retired, and you’ve got $1M sitting in your cool, low-cost Vanguard index fund, and that’s your retirement plan, and your spouse is all over you about it, and then there’s a COVID-19 type crash, I don’t think you need to know anything at all about whether or not our brains are millions of years hard wired to do this thing, that thing, or the other thing. You’re going to want to bail and scramble to cash. How many aeons did it take our brains to evolve to “Shoot first and ask questions later”? Or was that our brains before any evolution took place?

To be clear, that’s not what I advocate, and not what we did. But if we didn’t also have a healthy slug of cash and cash equivalents and I bonds and so on, perhaps we would have felt we had no choice.

Noobvestor · Post by **Noobvestor** » Mon Apr 27, 2020 3:15 am

nisiprius wrote: ↑Sat Apr 25, 2020 6:49 am3) The pattern of price movements in the stock market is chaotic, fractal. There are ups within the downs, there are smaller downs within those ups, and so on. It is virtually impossible for the human mind not to think it is seeing patterns in them, just as it is virtually impossible not to see "pareidolia," animal shapes in clouds, the man (or the rabbit or the woman carrying a bundle) in the moon, and so on. After the fact we look at long-term charts that hide even monthly fluctuations, let along daily or hourly, and see "a bear market" and forget what it looked like while it was happening. For example, it is surprisingly common to think that the great bull market of 2009-2019 was nothing but steady, solid gains.

Great observation. For fun or frustration, try running a Morningstar (or whatever site) chart on a particular investment or your whole portfolio. It's amazing how shifting between 1 month, 3 month, 1 year, 10 year, etc... views shifts not just the magnitude of things but also the shape of things. Suddenly an up-and-down zig-zag is evened out and looks comprehensible and obvious, smoothed to something only clear and simple in hindsight.

Post by **LadyGeek** » Mon Apr 27, 2020 8:45 am

Emotion is not found in any equation, but it can be one of the strongest influences on an investor's decision.

The field is called Behavioral Finance

The wiki has some background info: Behavioral pitfalls

Wiki wrote:When it’s time to make investing decisions, check your emotions at the door.

(This thread is in the Personal Finance (Not Investing) forum as it's not related to the mechanics of investing.)
Update: Moved back to the general investing forum.

Redlion · Post by **Redlion** » Mon Apr 27, 2020 9:03 am

Yes, I read several posts of Diehards on this Forum that ignored Jacks advice and sold out.

Call_Me_Op · Post by **Call_Me_Op** » Mon Apr 27, 2020 9:05 am

tvubpwcisla wrote: ↑Sat Apr 25, 2020 5:58 am One of the most important things we can do as an investors is nothing. Relax, be still, and steady. I see a lot of smart investors talk about when the market does x, I'm going to do y. Hundreds of thousands, if not millions of people cashed out during the Pandemic. Most wish they never did. I'm curious why investors have a difficult time doing nothing?

Simple. Humans are evolutionarily programmed to take action when faced with perceived danger. This is why it is so important to have a written plan to guide you.