FYI: In a recent Journal of Financial Planning article, Steve analyzed the costs and implications of selling investments during downturns. By his estimates, and others in the field, the cost to everyday investors is on the order of 100 to 150 basis points, annualized. Even if you aren't likely to panic during a downturn yourself, though, the potential for panic by others affects your investment environment because of how the risk of emotional selling is built into common practice in asset allocation. Let's take a look at that research, and what it means for investors and investing.
By focusing one's asset allocation squarely on ones goals and what is needed to achieve them, and using behavioral tools to mitigate emotional challenges, we can find a more effective answer than current risk-preference based allocations.
Regards,
Ted
https://www.morningstar.com/articles/883178/emotional-investing-what-it-costs-and-what-to-do-a.html
