This Common Investing Trap Messes With Your Mind-Here’s How to Break Free

If a 10% market drop makes you anxious enough to question whether your steady investing has been worth it, you’re not alone. For many long-term investors, market volatility can feel disproportionately painful, creating an emotional imbalance that may lead to poor decisions like panic selling or market timing.

Psychologists call this loss aversion—we feel the sting of losses more than the joy of gains. Add in recency bias, and sudden dips can overshadow years of progress. But understanding these tendencies isn’t just academic; it can protect your portfolio. By shifting your mindset, embracing volatility through tools like dollar-cost averaging, and automating your contributions, you can stop fearing downturns and start using them to your advantage.

Why Your Brain Tricks You Into Fearing Market Drops More Than Missing Contributions

Human psychology isn’t built for the stock market. “Losses scream; gains whisper,” says Marcus Holzberg, a certified financial planner at Holzberg Wealth Management. “You can save for years, only to have one bad month make you question everything.”

That sense of imbalance is rooted in loss aversion, a behavioral bias that makes the pain of losses feel about twice as intense as the pleasure of gains. Combine that with recency bias—the tendency to put more weight on recent events—and even a small dip can feel catastrophic.

Samantha Mockford, associate wealth advisor at Citrine Capital, puts it plainly: “Regular contributions are mindless—sometimes we forget we’re making them—but a sharp market downturn is occasional enough to be memorable.”

Even seasoned savers fall into this trap. “Our brains are wired to overreact to short-term losses,” says James Smith, co-founder at Vitality Wealth. A 10% drop in the market, which tends to happen about once every 30 months, “can feel like a major setback even though it’s just a blip in the long run,” he adds. In fact, the market has historically recovered from these types of corrections within an average of eight months.

How Dollar-Cost Averaging Turns Volatility Into Your Advantage

Instead of fearing volatility, many investors could benefit from reframing it as an opportunity. Dollar-cost averaging—a strategy where you invest the same amount on a regular basis—naturally encourages buying more shares when prices fall and fewer when they rise, Mockford points out, calling it “a great tool to help investors effortlessly ‘buy low.’”

Smith doubles down on that point, saying: “Every market dip gives your automatic contributions a chance to buy in at lower prices. That’s the power of dollar-cost averaging—turning volatility into opportunity.” But for it to work, you need a plan and discipline. That includes “a diversified portfolio that aligns with your goals,” he adds, and resisting the urge to act on fear.

To reduce emotional reactivity, Mockford even recommends limiting your exposure to daily account balances. “If you are someone whose emotions are attached to your investments’ performance that day, then do yourself a favor and don’t auto-fill your login credentials,” she says. “Appropriately invested assets are like a Crock-Pot—the less you peek, the better.”

The Bottom Line

Market swings feel bigger than contributions because our brains are built to fear losses and fixate on the short term. But with a sound plan, consistent investing, and a few mindset shifts, you can turn that volatility into a long-term advantage. As Holzberg puts it: “Short-term pain during market swings doesn’t change long-term goals.”