We all know that panic is one of the ways investors lose money.
Panic selling during the global financial crisis of 2008-2009 may have put some investors in a completely bearish position. Not only did they lose money, they could not benefit from the remarkable recovery since then.
The panic during the March 2020 shutdown caused many people to lose tons of money instead of making money that year. Meanwhile, selling panic at the start of any war is usually a losing proposition in the long run.
If you want to be a good investor, you must learn not to panic when the world is uncertain. But not panicking is easier said than done when you’re watching your portfolio quickly lose value.
Dealing with emotions is why we get used to compartmentalization, so we stay separate enough to withstand whatever life throws our way. He is an undirected investor with risk management who tends to blow himself up.
But how panic makes us lose money in not investing the way? I have a recent example to share.
How Fear Lost Me Money
Despite feeling purposeful while painting a newly installed door in my rental house, I ran into a snafu. I needed to start by highlighting the door before applying the exterior and interior paint.
Instead of going to the store to buy a new primer, I remembered I had a gallon at my nearby rental. So I went to dial the garage code, which didn’t work. I then emailed my employer to get the correct code, but he did not respond. So I wrote to my wife, who gave me the correct code. Good.
Once in the garage, I quickly found a gallon of primer on the side shelf and headed out. But when I pressed the Enter button on the keypad to close the garage door, it would only go down a few inches before popping up again. I tried several times before realizing the laser sensor at the bottom was missing.
I looked at the control panel inside the garage, and the display said “sensor warning” again. Even when I pressed the interior button, the door wouldn’t close either. Frustrated, I went back to my other rental to continue fixing things while I sent my landlord another email asking where the sensor was.
Everything was working fine before they came in. So I thought their car might have hit the sensor and broken it. However, I could not accuse my employers of violating the code of conduct because I had no proof.
The Beginning of Panic
I decided to keep asking while I waited for his email response. After about 10 minutes, I started to feel worried. I was hoping that the garage door would close by itself, but when I came to check again, it was still open.
At the same time, I didn’t want paint on my brushes and trays to dry. They were sitting outside in the hot sun, and I had forgotten to bring Saran Wrap. I also wanted to finish the job as soon as possible because my tenant was working in the next office. He’s nice, but I get the sense that he’d like to see me as few times as possible, which is good.
Hmm, what should you do.
In my opinion, I didn’t want to leave this garage exposed – because there were things belonging to the tenant and the door to the house – so I decided to call the garage door company and send a text message to my tenant to explain the situation. My tenant still hadn’t responded so I had to make the ultimate decision.
He apologized for not getting back to me sooner, saying he was in a meeting. It’s completely understandable. He said that fixing the garage door was on his to-do list, and that to close the garage door, he simply pressed the interior button continuously.
Darn. Why didn’t I try that? All I did was quickly press the button several times.
I then told him that I had just called the garage door service company and was wondering if I should cancel, since there is a $95 service fee and parts and labor if anything needs to be fixed. Because the garage door was working fine before, I wanted him to pay for the repair. But I also wanted to be fair.
So I came up with a compromise. I simply asked if he would be willing to split the cost 50/50.
At first, he said he would like to handle the problem himself. But he quickly realized that my paying the part and fixing the problem immediately while he was at work was pointless. It saved time and money, especially if they were the ones breaking it.
Amazing Fix
I thought the garage repairman would come in about 30 minutes, so I went back to the other place I rented to finish the repair.
But just seven minutes later, I got a call telling me that he had arrived. So I put down all my painting supplies and went back.
He quickly looked at the problem again found a missing sensor behind the rail, buried under some cobwebs! Ugh, why didn’t I look right?
He said he could replace the sensor for $275, but I would need to move the car so he could reprogram the engine above. Since I didn’t have the keys to my employer’s car, that was impossible.
The next solution was to attach the sensor to the support arm and see if it works. With no other choice, I told him to go with the tap option.
In less than four minutesthe sensor was working again, and the garage door closed properly with one press of both keypads.
He then invoiced for $95. I asked him to cut a deal for me since the job was so fast. No.
Wow. I felt dumb for spending so much time on work that a 5 year old could do in the same amount of time.
To make myself feel stupid, I went back to paint my side door for another 35 minutes, cleaned up, and drove home before sending my tenant the receipt and the good news that everything was fixed. He was very happy and sent me another $47.50 for the next rental payment.
Taking Your Time Is Important
If I hadn’t panicked I would have called the garage repairman.
I had to close the paint lid, use the paint in the tray, saran rolled up my roller and paint brush (which I didn’t have) and spent just three minutes looking around the sensor. I probably could have found it myself and glued it in place, saving $95.
Instead, I let my mind wander about two things: paint drying and someone stealing something from my employer’s garage.
If you don’t have enough mental bandwidth, your brain loses the ability to think clearly. As a result, sometimes you spend more money than necessary.
How to Avoid Fear and Make Better Financial Decisions
Panic rarely leads to good financial decisions. Whether it’s investing, running a business, or dealing with everyday problems, hustle often costs money.
Here are a few ways to reduce panic and make better decisions.
1. Pause Before Taking Action
If something goes wrong, take a moment before making a decision. Even a 5–10 minute break, if time permits, can calm your nerves and help you think more logically.
Most problems are less urgent than they initially seem.
2. Try the Simple Solution First
Before calling a professional or spending money, spend a few minutes solving the problem yourself.
Look around. Check out a few options. Many problems have surprisingly simple fixes.
3. Avoid Artificial Time Pressure
Most panic comes from a sense of urgency. In my case, I am concerned about the paint setting and the open garage. I probably had about 20 minutes before the primer dried on my brush and roller. And if I took 15 minutes longer, I don’t think my employer would care.
At that time, the houses were in a quiet area and there were few people walking. The probability of someone breaking into the garage to steal anything was less than 1%.
4. Give Your Mind Enough Bandwidth
When you multitask, your ability to think clearly decreases. Multitasking often leads to costly mistakes. Sometimes slowing down actually saves both time and money.
5. Remember Most Problems Are Temporary
When something unexpected happens, our brains tend to jump to the worst scenarios.
But most problems are minor and temporary. Taking a moment to reflect can prevent unnecessary financial decisions.
Ironically, panic rarely solves problems quickly. It usually just makes them more expensive.
The next time you feel the urge to rush into a decision, pause. You could save yourself more than $95.
Readers, have you ever had an investment-related panic attack that cost you money? How do you learn to stay calm under uncertainty to make better decisions?
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