What do you think is more common - people panic selling because they see their paper losses and their mind just can't intuitively process it ... or people panic selling because they are overexposed, overleveraged, nearing retirement, i.e. have actual *reasoning* for needing the money?
I understand the latter, that part makes sense to me. You may very well *need* this money and are not willing to be flexible with your current lifestyle (i.e. push the retirement goalposts) to accommodate the current situation. Understood.
But if you're not in that latter bucket, let's assume you don't *need* the money that you're pulling out of the market. No upcoming large purchases, no retirement on the near horizon, etc. So what exactly are these people doing once they liquidate? Watching it sit in a savings account knowing it is now "safe" from further paper losses, even though they just guaranteed losses by selling?
This is the part of investing that I find extremely interesting - without logical/just reasoning for actually *needing* the money (highly subjective of course) is it not just 100% human psychology and fear of the unknown at that point which drives the panic sale? I realize there are probably speculatory fears such as "what if this time it's different?" and "what if we enter a 15-year recession?" Are the people who panic sell not proactively mentally prepared for those thoughts?
I am currently reading The Psychology of Money by Morgan Housel, after having just read The Simple Path to Wealth by J.L. Collins. I was a college Psychology major and the more involved I become with investing the more I am realizing just how psychological the whole thing really is. It seems like 95% of it is man vs. himself. It's truly fascinating.
Would love to hear from someone who had major confidence in the strength of their 'investing mind' who was then truly tested by something like the 2008 crash, and how you personally reacted both mentally and physically.