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Glossary entry · Trade-offs
Panic selling
Definition
The act of selling investments during a market drop because the fear of further losses overwhelms rational thinking. Locks in what would otherwise be a temporary loss into a permanent one. Decades of behavioral data show this is the single most expensive mistake retail investors make.
Example
Investors who sold in March 2020 missed a near-100% rally over the following 18 months.
Related
Trade-offs
Risk
The chance that an investment loses value — and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
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