Buy stocks in a bear market. It sounds a whole lot easier than it is. Truth be told, when it comes time to buy stocks, you won’t want to.
As discussed previously regarding bonds, when assets are in a bear market, and prices are lower, investors repeatedly don’t buy even though they should. Such is why after three major bull markets since 1980, 80% of individuals are woefully unprepared for retirement.
“Loss aversion” is one of the leading factors influencing investment decisions, according to a recent survey from the C.F.A. Institute of investment practitioners.
What is loss aversion?
“Loss aversion is a tendency in behavioral finance where investors are so fearful of losses that they focus on trying to avoid a loss more so than on making gains. The more one experiences losses, the more likely they are to become prone to loss aversion.
Research on loss aversion shows that investors feel the pain of a loss more than twice as strongly as they feel the enjoyment of making a profit.” – Corporate Finance Institute