The 7 Deadly Sins of Investing

How to Avoid Emotional Traps and Invest Smarter for Retirement

It’s human nature to react emotionally when things feel uncertain. Nowhere is that more evident than in investing — especially when the markets are bouncing like a yo-yo, the headlines scream panic, and your retirement nest egg feels like it’s on the line.

But here’s the truth: emotional investing is one of the most destructive forces to long-term wealth. That’s the central message financial advisors Joel Garris and Chet Cowart unpacked in a recent episode of their Dollars & Sense podcast. Together, they outlined the “Deadly Investing Sins” — the common psychological pitfalls that even seasoned investors fall into — and laid out a plan to protect your money (and your peace of mind).

Let’s break down what they shared, why it matters, and how you can apply it to build a stronger financial future.

Fear is a Powerful Force – But It’s a Terrible Advisor

Ever seen a headline like “Dow Drops 1,000 Points in a Day!” and felt your stomach twist? That’s fear doing what it does best: triggering an impulsive response.

What you don’t hear as often is this key context, which Joel emphasized in the podcast:

“A 1,000-point drop sounds like a big number… but it’s less than 2.5% of the index at today’s value. That same drop used to mean a 10% collapse.”

In other words, the market has grown so much over time that point drops are less significant than they seem. But the media often reports raw numbers, not percentages — and those raw numbers scare people into making short-sighted moves.

Why this matters

When fear takes over, rational decision-making shuts down. That leads investors to:

• Sell when prices are low
• Buy when prices are high (after the hype)
• Miss the recovery entirely

Fear can be a signal to investigate, but it’s not a strategy. Long-term investing requires perspective, not panic.

According to a 2023 Fidelity study, investors who stayed the course during volatile periods had significantly better outcomes than those who moved to cash and waited for the “right time” to get back in.

Buying High, Selling Low – The Classic Investing Mistake

If fear is the villain, FOMO (fear of missing out) is its equally dangerous sidekick.

When markets surge, people want in. When they fall, people want out. That’s the exact opposite of what successful investing looks like.

Chet explained the trap:

“We see it all the time. People get out of the market… but the harder part is knowing when to get back in.”

Trying to “time the market” sounds strategic — but statistically, it’s nearly impossible to do well. To make it work, you’d have to predict both the top and the bottom. Most people miss both.

The data doesn’t lie

The cost of missing even a few good days is enormous. According to J.P. Morgan Asset Management, investors who missed the 10 best days of the market over the last 20 years saw their returns cut in half. Miss the top 20? The outcome was even worse — some barely broke even.

And those “best days”? They often occur right after the worst ones, when fear is highest and investors are most tempted to bail.

The VIX: Wall Street’s “Fear Index” You Should Understand

To quantify market anxiety, Wall Street uses a tool called the VIX — short for the Chicago Board Options Exchange Volatility Index. It’s also known as the “fear index.”

So what does it measure?

“The VIX is a measure of price action… how violently prices are flipping around,” explained Chet. “A VIX above 30 means anxiety is rising. Over 40? That’s panic mode.”

Why you should care

When the VIX rises, it’s often a sign that volatility is increasing — not necessarily that the market is doomed, but that uncertainty is high. The VIX tends to move inversely to stock prices: when the market falls, the VIX climbs.

But here’s the thing: it doesn’t stay elevated for long. Joel noted that historically, the VIX has only spiked above 40 a few times — mostly during major crises like 2008 or the COVID-19 crash in 2020.

Let that sink in. The panic feels loud, but the actual data says it’s rare and temporary.

Want to dive deeper? Read: What is the VIX?

The Illusion of Average Returns – And Why They’re Misleading

You’ve probably heard that the S&P 500 delivers an average annual return of about 10-11%. Sounds great, right?

But here’s a statistic that might surprise you — and it stunned even the podcast hosts:

“From 1984 to 2023, the S&P 500 returned an average of 11.33% per year… but only three of those 40 years actually returned between 9% and 12%.”

Let that sink in. The market very rarely behaves “on average.” Most years were significantly above or below that number. So chasing a perfect 11% every year? Unrealistic.

What matters is your long-term discipline, not short-term perfection.

The 3-Step Strategy to Survive Market Volatility

Instead of giving in to panic or chasing unrealistic returns, Joel and Chet shared their simple, effective three-step formula for riding out the storm.

STEP 1: BE CONSISTENT – EVEN WHEN IT’S HARD

Dollar-cost averaging — regularly investing the same amount regardless of market conditions — is one of the most reliable strategies in the book. It takes emotion out of the equation and smooths out your cost basis over time.

Think of it as showing up at the gym even when you don’t feel like it. Consistency builds momentum.

STEP 2: DIVERSIFY (MORE THAN YOU THINK)

An investment portfolio that moves in perfect sync with the market isn’t diversified — it’s overexposed.

“Not being down as much as the overall markets — that’s a credit to having a balanced portfolio,” Chet said.

Proper diversification includes:

• U.S. and international stocks
• Bonds and fixed income
• Large and small-cap companies
• Defensive sectors like healthcare or utilities

Diversification isn’t about eliminating risk entirely — it’s about managing it intelligently.

STEP 3: CONSUME FINANCIAL NEWS IN SMALL DOSES

This one’s tough — but crucial.

Modern media thrives on fear. Joel didn’t sugarcoat it:

“They are selling fear. And fear is easier to sell — it drives ratings.”

By constantly absorbing market news, you’re feeding the exact emotions that derail smart investing. Stay informed, yes. But know when to turn off the noise.

A recent Pew Research study found that financial misinformation is rising on social platforms — often shared emotionally, not factually.

Bottom Line: Volatility Isn’t the Enemy – Emotional Reactions Are

You don’t need a crystal ball or a Ph.D. in economics to be a successful investor. But you do need discipline, perspective, and a plan.

The market will rise. It will fall. That’s the nature of investing. Trying to avoid every dip will cost you more than the dip itself.

Instead of reacting emotionally, respond intentionally.

Build a plan that aligns with your goals. Stick to it. Tune out the panic, and remember that investing is a long game — not a daily contest. And if you have trouble sticking to it on your own, that’s where smart financial planners and advisors in Orlando like us can help you create the right investment and retirement plan, adhere to long-term strategy, and help you achieve your retirement goal.

What Should You Do During a Market Drop?

Let’s say the market drops 5% in a day — you see red numbers flashing, your account balance dips, and the voice in your head starts whispering, “Maybe I should sell before it gets worse…”

That’s your emotional brain talking. But let’s pause and get practical.

HERE’S WHAT YOU CAN DO INSTEAD:

✅ Revisit your goals. Are you investing for retirement 10, 15, or 20 years from now? If so, what happens today is a blip — not a verdict.

✅ Check your diversification. If one account dropped more than others, look at its investment. This is a great time to review your asset allocation.

✅ Rebalance if needed. Sometimes, volatility creates an opportunity to buy lower-priced assets. A rebalance might help you stay aligned with your goals, without chasing returns.

✅ Talk to someone. No shame in feeling uneasy. A quick conversation with a trusted financial advisor can reset your perspective.

“The market’s job is to transfer money from the impatient to the patient.” — Warren Buffett

That quote isn’t just clever — it’s incredibly accurate. The people who stay invested during tough times are usually the ones who come out stronger.

A Note for Pre-Retirees

If you’re within 5 to 10 years of retirement, it’s perfectly reasonable to feel more cautious during volatility. You’re closer to needing that money. But even here, the answer isn’t panic — it’s planning.

CONSIDER:

A “bucket strategy,” where you segment your savings into short-, mid-, and long-term “buckets” of money. Your near-term needs are safe, while your long-term funds can keep growing.

Having 6–12 months of living expenses in cash or very low-risk instruments to weather downturns without needing to sell investments.

Running a retirement stress test to see how your portfolio would hold up in different scenarios (our trusted financial advisors can do this for you).

Understanding Risk Tolerance vs Risk Capacity

Here’s a distinction most people overlook — but it’s huge.

• Risk tolerance is how much market volatility you’re emotionally comfortable with.
• Risk capacity is how much risk you can take based on your timeline and income needs.

Some people feel comfortable taking risks, but can’t afford to. Others could handle more volatility financially, but don’t want the stress.

Balancing the two is essential.

Not sure where you fall? Schedule a FREE conversation with our team today!

Avoid the “Headline Investing” Trap

If your investment decisions shift every time a news anchor sounds dramatic or a market chart zigzags — take a breath. It’s easy to get sucked into what we call “headline investing.”

But here’s the kicker: financial journalism is often about attention, not advice.

Want proof? Researchers at the American Institute for Economic Research found that emotionally charged news coverage increases volatility — but doesn’t correlate with long-term returns.

In other words, the media can make you nervous, but it can’t make you money.

Final Thoughts: Your Plan Should be Stronger Than the Headlines

Markets go up. They go down. That will never change. What matters most isn’t the fluctuations — it’s how you respond to them.

You don’t need to be perfect. You don’t need to predict the next crash or pick the next big winner. You just need a plan built on:

• Consistency
• Diversification
• Time-tested wisdom
• A little bit of nerve

Whether you’re decades from retirement or almost there, the takeaway remains the same: Don’t let fear run the show. Let strategy lead the way.

If you’re ready to get a second opinion on your investments — or build a plan that feels like you — let’s talk. At Nelson Financial Planning, we’re here to help real people make smart financial decisions, free from hype, high pressure, or guesswork.

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