Fear & Investing: Why Your Emotions Are Destroying Your Returns
Look, I’m going to tell you something the financial industry doesn’t want you to hear: Your biggest enemy isn’t a market crash. It’s not inflation. It’s not even picking the wrong stocks.
It’s you. Your fear. Your panic. Your emotions.
I’ve watched otherwise intelligent people ruin their financial futures because they couldn’t control the voice in their head screaming “SELL EVERYTHING!” when markets tumble. I’ve done it myself. And it’s crushing our returns.
The Brutal Math of Emotional Investing
Here’s the ugly truth: while the S&P 500 has returned about 10% annually over the past 30 years, the average investor has captured just 4%. That’s not a small gap. That’s the difference between retiring comfortably and working until you’re 70 (or more 😉).
Why does this happen? Because we’re mentally programmed to make terrible investing decisions.
When COVID hit in March 2020, millions of investors panic-sold at the bottom. By the time they felt “safe” enough to get back in, markets had already rocketed up 30%+. They locked in losses, then missed the recovery. This pattern repeats in every market crash, like clockwork.
Meanwhile, Warren Buffett was writing opinion article titled “Buy American. I Am” during the 2008 crisis when everyone else was running for the exits. That’s not because he’s smarter than you. It’s because he’s trained himself to control his emotions when everyone else is losing their minds.
Your Brain Is Literally Working Against You
When markets crash, your brain doesn’t see numbers on a screen. It sees a threat. The same regions that light up when you spot a predator activate when you watch your portfolio drop 20%.
Your amygdala floods your body with stress hormones. Your prefrontal cortex—the rational thinking part—gets overwhelmed. And suddenly, the long-term investor who “knows” markets recover becomes a terrified animal desperate to escape danger.
I’ve sat there watching my portfolio bleed red, physically unwell, unable to sleep, convinced this time was different. This time the market wouldn’t recover. This time we were headed for a depression. It’s a visceral feeling that logic can’t easily override.
And the media? They’re pouring gasoline on your fear. “MARKET BLOODBATH” headlines sell way better than “Normal Market Correction: Probably Nothing to Worry About.” They know fear drives engagement. Your anxiety is literally their business model.
How I Stopped Panicking (And Started Making Money)
After watching myself make the same emotional mistakes through multiple market cycles, I’ve developed systems to protect myself from… myself.
1. I stopped checking stock prices daily
Seriously. Nothing good comes from watching your stocks bounce around every day. When I limited myself to monthly portfolio reviews, my stress decreased and my returns improved. The daily noise was just triggering my fight-or-flight response for no reason.
Each time I felt the urge to check during a market dip, I asked myself: “What actionable information will I gain from this?” The honest answer was always “nothing useful.”
2. I focus on the business, not the stock
When my stocks portfolio drop 34% during COVID 19, I don’t think about the paper loss. I ask: “Has anything fundamentally changed about this business?”
Amazon dropped over 90% during the dot-com crash. The business was getting stronger every day. The stock price was just noise. Investors who understood the difference between price fluctuations and business performance made fortunes.
During the 2020 crash, I watched a stock (TTE.PA)I owned drop 40% in a month. Instead of panicking, I read their earnings reports, checked their balance sheet, and actually bought more. Two years later, it increased by 60 % from my purchase price. Had I focused on the scary price chart instead of the healthy business fundamentals, I’d have sold at a huge loss.
Think about it: Are you seeing the business for what it is, or just the price on the screen?
3. I started tracking my fear (seriously)
I keep what I call a “fear journal.” When markets tank and I feel that familiar panic rising, I write down exactly what I’m afraid of and what I think will happen next.
Then I revisit these entries months later. It’s humbling how consistently wrong my worst fears have been. After doing this through several corrections, I’ve developed a strange comfort when fear arises: “Ah, there’s that feeling again—the one that’s been wrong every single time.”
My entry from March 2020: “This feels different. Businesses are shutting down. This could be a multi-year bear market.” How’d that prediction turn out? The market hit new all-time highs just a couple of years later .
4. I learned to love dividends
There’s something psychologically powerful about getting paid while markets crash. When my portfolio was down 34% in 2020, for my most of my stocks the dividends kept rolling. Those regular payments were tangible proof that my investments were still working, regardless of what the market price said that day.
While other investors were panic-selling, I was reinvesting those dividends at discounted prices. Each market crash became an opportunity to buy more income-producing assets on sale.
The Hardest Thing You’ll Ever Do As an Investor
The most difficult investing skill isn’t finding great companies or timing market cycles. It’s simply not destroying your own returns through emotional reactions.
Ask yourself honestly: The last time markets dropped 20%+, what did you do? Did you sell? Stop investing? Check your portfolio obsessively? Or did you stay committed to your plan with complete focus and determination ?
Most people can’t handle watching their net worth drop by 30% without doing something—anything—to make the pain stop. But that “something” usually locks in losses and ruins their financial future.
The question isn’t whether markets will crash again. They will. The question is: When they do, will you have the emotional discipline to stay the course? Or will you become another statistic—another investor who captures just a fraction of market returns because they couldn’t control their fear?
Let me leave you with this: If you wouldn’t sell your stocks in a raging bull market, why would you sell during a bear market when everything is on sale?
The next time fear starts whispering in your ear, remember: Your emotions are designed for survival in the wilderness, not wealth-building in financial markets. The investor who masters their emotions will almost always outperform the one with superior analytical skills but poor emotional control.
What financial mistake are you determined not to repeat during the next market crash?
That’s it for today! If you found this post helpful, please subscribe to my newsletter for valuable content on stock and dividend investing.
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