🎭 Fear vs. greed: how to stop yourself from sabotaging your investments

☕ Good morning!

If you’ve ever thought, “Maybe I’ll just sit this one out,” during market whiplash, you’re not alone, and you might be sabotaging yourself. 

The biggest gains often arrive on the ugliest days, hidden behind fear, volatility, and bad headlines. But stepping out, even briefly, doesn’t just “miss the upside.” It fractures the long-run compounding curve you’ve spent years building.

Smart capital is systemized. Today, we’re talking about how you can build a portfolio and process that can keep you in the seat when conviction is in short supply. 

🔺 Volatility lies, math doesn’t

Market downturns can be gut-turning, especially when it seems like the world is crashing in on your life savings. I get it.

Statistically, markets can and will be brutal, and the extremes of natural human behavior compound the impact. Prior performance isn’t a predictor of future results, but historically, markets bounce back.

Investors love the idea of catching the rebound. However, they want to do it with perfect timing, stress-free clarity, and a clear headline banner. They want to be the guy or girl who “timed” the market, pulled out with crystal ball foresight just in time to see the crash, and then bought back in at the bottom.

The problem is, that unicorn doesn't exist. Most of the biggest up days come while VIX is still screaming and sentiment is still a trainwreck. 

They seemingly come out of nowhere, but the experienced investors know they’re coming. 

From 1990 to 2023, the S&P returned approximately 10% annually. If you missed just the best 10 days and your return would drop by nearly half. Many of those days came during peak panic, not after. 

Case in point: October 13, 2022. Red-hot CPI print, nuclear market open… then a total reversal, jumping 2.6% after earlier being down as much as 2.4% and touching its lowest level in about two years

If you were in cash waiting for calm, you missed the uptick.

Avoiding emotional sabotage isn’t about being superhuman. It’s also not about having a Buddhist-monk level of detachment from your money.

It comes down to your playbook you’ve prepared before the drama hits. That’s where behavioral alpha lives, and yes, it’s quantifiable. Investors who let fear drive decisions routinely underperform their own portfolios by 150–500 basis points annually. 

That’s not market bad luck, it’s process failure. See below how missing some of the best market days can drastically change your long term results:

🛠️ Rebalance for real, not for optics

Risk isn’t static, so your portfolio shouldn’t be either.

Rebalancing is when a strategy either becomes sharper or is exposed. Done right, rebalancing is throttle control. 

Professionals lean on tools like Adaptive Risk Parity or volatility buckets: “If VIX crosses X, rotate Y% into dampeners.” This is like a pre-committed GPS system. You still own risk, but now it’s measured, not manic.

That’s also where financial planners come in. We track the stuff you miss, like increased equity exposure after a run-up and creeping sequence-of-returns risk. When life gets busy, we stay on top of it. You pay us to obsess over the delta before it becomes damage.

And when risk spikes? Don’t flee, rotate. That’s when managed futures, market-neutral equity, and real assets with contract-backed income streams become more than ballast. They become a behavioral firewall.

Solid diversification protects your mindset from collapsing during chaos. The error lies in assuming it’s a one-time thing; you should regularly rebalance, ideally quarterly or in response to significant shifts in volatility or allocation drift.

Especially for those nearing or in retirement, it can mean the difference between pausing drawdowns or panic-selling equities at generational lows. 

🪙Cash isn’t the problem. Cash without a plan is.

You’ve heard the saying, more money, more problems.

Categorically, I disagree. Money is more solutions. 

However, I concede that it can become a psychological crutch. Too many investors use cash like a panic room, abandoning strategy when markets lash out. 

Well-structured cash is about conviction. For example, you don’t need to guess how much liquidity you’ll need during a crash, you can model it. Monte Carlo simulations or historical bear market stress testing help estimate how long your portfolio can operate without forced asset sales. 

Your job is to translate that into defined, not improvised, cash reserves.

High earners nearing transition points, whether a job change, equity liquidity event, or retirement, need frictional cash buffers that are tactically separate from long-term exposure.

No “wait for clarity” move should come from your growth engine. That’s how you miss rebounds.

And when liquidity dries up, you don’t want to be hunting for bids. Professionals pre-wire exit ramps through instruments such as laddered T-bills, repo-eligible bonds, and defined access to defensive liquidity.

Making Sense of Staying in the Game

Staying in the game is about thinking on a longer time horizon and not just hoping this week’s headlines don’t wreck your account. It means zooming out and building around probabilities, not possibilities.

This line of thinking will test your conviction. If your portfolio is overly concentrated, say, in a single stock, startup, or sector, you’re not just exposed to market risk; you’re exposed to business fragility. 

That’s a different game than holding broad indices or diversified asset classes. Know what you own, and why it deserves your long-term trust.

A well-built portfolio eliminates panic decisions. Instinct will scream, “get out.” 

Process calmly says, “Stay in. Adjust smart. Trust the system.” 

That's the real edge. Just because you’re “hands off” the market doesn’t mean your planning is idle. 

Create a meaningful, structured portfolio that anticipates stress scenarios, uses strategic liquidity, and keeps your risk posture aligned, even when you’re not actively watching.

Stay savvy, stay proactive, and keep your financial future bright.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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