Panic and Sell, Now What?
Larry Swedroe of Buckingham Strategic Partners shared his insights in the Evidence-Based Investor about what happens when investors follow their emotions and engage in panic selling during a market downturn.
The bear market sparked by the COVID-19 crisis presented investors with a test of the ability to control their temperament, which Buffett advised was the key to successful investing. On February 19, 2020, the S&P 500 closed at 3,386. Just 23 trading days later, on March 23, it closed at 2,237, a drop of 34 percent — the sharpest drawdown in history over such a short period. How did investors fare? Did they control their temperament?
While we don’t know how all investors did, we do know a large percentage failed the test.