Bear markets hurt emotionally—a lot. I call the stock market The Great Humiliator (TGH). And TGH likes nothing more than scaring as many people out of as many dollars for as long as it can—before it goes up (or down). A bear market is TGH at its absolute deadliest.
TGH robs people of returns any way it can. First, near term, you’re down big. Huge unrealized losses. Utter humiliation, fear, and agony. Also, TGH knows people hate losses more than they love gains. Therefore, bear markets are so painful they make folks do crazy things that ultimately hurt them—for most of them, much worse in the long term than if they simply sat on their hands. Things like capitulation-selling at the absolute low. Far too many investors, on their own, do this to their heavy detriment—often in the name of “waiting for clarity.” Or, in the depths of bear market agony, many investors suddenly decide they can’t handle big stock volatility anymore (or whatever the myriad other reasons) and change their long-term strategy to hold a bunch of cash and bonds, right in time to miss the huge stock market bounce off the bottom. (Read more in Bunk 9.) And maybe a bunch of those investors even swear off stocks for years, then change their minds again late in the next bull market (missing most of the upside), thinking they’ve gained a new sense of “clarity” that will evaporate (again) in the subsequent bear—which whacks them (again). TGH is cruelly perverse.
Another variation: ...

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