Is Never Panic-Selling an Investing Superpower? What the Crash Data Shows

I posted this from my Engineer Investor account on November 6, 2026:

“My investing superpower is that I don’t feel the urge to sell, regardless of what the market is doing.”
via @egr_investor

Disclosure: I write both Summitward and the Engineer Investor account.

The tweet describes a feeling. When prices fall, I don’t get the pull to get out. Whether that is an advantage comes down to three things the research can measure: how many investors sell when markets fall, what selling cost the ones who did, and whether feeling calm before a crash predicts how anyone behaves during one.

The evidence supports a narrower claim than the tweet makes. Most investors already don’t sell. The minority who sell everything have paid for it, mostly by getting back in late or never. And people’s attitudes toward risk shift during a crash, including people who lost nothing, so calm in a rising market is weak evidence.

How many investors sell when markets fall

Each study below defines “selling” its own way, so read each number against its own definition.

Study	Who and when	What counted	Result
Fidelity 401(k) data, reported 2011¹	7.1 million workplace accounts, October 2008 to March 2009, while the S&P 500 fell 31%	Sold every equity holding	About 117,000 accounts, roughly 1.6%
Elkind, Kaminski, Lo, Siah & Wong (2022)²	653,455 brokerage accounts in 298,556 households, 2003 to 2015	Equity holdings down 90% in one month, at least half of it from trades	About 0.1% of investors at any given time, up to three times that in large declines; about 9% of households did it at least once in 13 years
Vanguard, How America Invests (2020)³	More than 5 million retail households, first half of 2020	Any trade; leaving equities entirely	22% traded, and 62% of those moved money into equities. Fewer than 1% left equities completely
Giglio, Maggiori, Stroebel & Utkus (2021)⁴	Vanguard clients who answered the authors’ survey, January 31 to March 31, 2020	Equity share changed by 1 percentage point or more	About 70% made no such change, whether they had described themselves as optimists, neutral or pessimists beforehand
Calvet, Campbell & Sodini (2009)⁵	Every household in Sweden, 1999 to 2002	Rebalancing after gains and losses	After poor returns, households rebalanced mainly by buying more risky assets, offsetting about half of the drift

Survey evidence matches the account data. Hoffmann, Post and Pennings followed brokerage clients through 2008 and early 2009 and found that in the worst months their return expectations and risk tolerance fell while their perception of risk rose. Their behavior barely followed: investors “continue to trade actively and do not de-risk their investment portfolios.”⁶ Giglio and coauthors, surveying Vanguard clients from 2017 to 2020, find that changes in beliefs do not predict when investors trade, and that a one-point rise in expected returns goes with only about a 0.7-point higher equity share, roughly a tenth of what standard models imply.⁷

By these measures, the investor who doesn’t sell is the typical investor. Inertia accounts for a lot of it. The investor who sells everything is a minority: well under 1% of accounts in any one month, and about one household in eleven over a 13-year span that included 2008.

What selling cost the people who did

Fidelity tracked the roughly 117,000 savers who sold all their stock between October 2008 and March 2009. Those still out of stocks on June 30, 2011 saw their average balance rise 2%. Those who sold and later went back in were up about 25%, and savers who kept some stock throughout were up 50%. About half of the sellers had not reinvested by mid-2011.^{1, 8}

Those are changes in account balances, so they include new contributions, and the groups sorted themselves. A worker who sells every share in March 2009 may differ in age, income or job security from one who doesn’t. Savers who kept some stock came out well ahead, but the 48-point spread is not a clean estimate of what selling cost.

The Elkind study adds the mechanism. Panic sales did cut losses while markets were falling fast. In the authors’ example, an investor who sold at the start of the 2008 crisis and stayed out fifteen months avoided a further 17% loss. The cost came afterward: the authors report that the median investor earned a zero to negative return after panic selling, and 30.9% of panic sellers had not returned to risky assets by the end of 2015.² Most of the damage came from re-entering late or never.

What the behavior gap measures

The most quoted number in this debate is Morningstar’s. In its 2026 Mind the Gap study, the average dollar in US mutual funds and ETFs earned 8.7% a year over the ten years to December 2025, against a 9.9% total return for the funds, a gap of about 1.2 percentage points. The gap varied by category: about 0.4 points for US equity funds, 0.7 for allocation funds and 1.2 for sector equity funds.⁹

Morningstar warns against reading that gap as the cost of panic. The 2026 report says that “even laudable practices like investing a portion of every paycheck or regularly rebalancing can open a gap,” and that its estimate “is not a proxy for the average investor’s dollar-weighted return.”⁹ A hypothetical shows how. A fund gains 100% in year one and loses 50% in year two. A dollar invested at the start ends at one dollar, so the fund’s time-weighted return is 0%. An investor puts in $100 at the start and another $100 at the end of year one, and never sells. The account holds $300 after the second deposit and $150 at the end. On $200 contributed, that investor’s dollar-weighted return is about −17.7% a year. There is no panic sale anywhere in that history; the whole gap comes from when the money arrived.

A 2026 paper in the Financial Analysts Journal re-examined the sample behind Morningstar’s 2025 edition. After changing how cash flows are timed and measured, the authors put the part of the gap attributable to poor timing at about 0.10% a year.¹⁰ Our robo-advisor returns guide covers their method in more detail.

So for an investor who owns broad index funds and adds money on a schedule, the average cost of bad timing is small. The cost for a household that sold out in early 2009 and stayed out was large. Not selling protects you from that tail outcome, and an average gap measures it poorly.

Why feeling calm now says little about a crash

I can’t check this part of the tweet against my own experience. The research says attitudes toward risk move with markets, and that people predict their own reactions poorly.

Risk aversion jumps after a crash, even without losses. Guiso, Sapienza and Zingales surveyed clients of an Italian bank in 2007 and again in 2009. The share who wanted to take no financial risk at all rose from 16% to 43%. Risk aversion rose even among clients who had lost nothing, which points to fear rather than lost wealth, and clients whose risk aversion rose were four times as likely to sell stocks at the worst point of the crisis. In a lab version, students shown a clip from a horror film demanded a 27% higher risk premium.¹¹
Risk taking shifted quarter to quarter. Weber, Weber and Nosić surveyed UK online-brokerage clients every three months from September 2008 to June 2009. Risk taking “changed substantially” over that period. The changes followed investors’ subjective sense of risk and return more closely than their numeric forecasts.¹²
Risk questionnaires predict little. Brooks and Williams tested standard attitude-to-risk questionnaires against realistic market-crash scenarios in a large UK survey. The questionnaires did not reliably indicate who would sell and who would hold. Past experience, emotions and personality traits, including financial self-efficacy and extraversion, did better.¹³ The study measured what people said they would do in a scenario; it did not observe their trades.
Confidence went with more panic selling. In the Elkind data, investors who were male, over 45, married, had more dependents, or rated their own investment experience or knowledge as excellent freaked out more often.²
Emotional reactivity went with worse trading. Lo, Repin and Steenbarger followed 80 day traders for five weeks; those with more intense emotional reactions to gains and losses performed significantly worse.¹⁴ It is a small sample of trainee day traders, so it says more about trading than about holding index funds.

Circumstances also explain a lot of calm. An investor with a long horizon, steady income and cash set aside for near-term spending has no forced sale to fear, and that position is easy to mistake for temperament. Some of my own calm probably comes from that. The harder test arrives when a job loss or a large bill lands during the decline, as it did for many households in 2008 and 2009.

How often you look matters

Benartzi and Thaler proposed that the size of the equity premium is consistent with loss-averse investors who evaluate their portfolios about once a year.¹⁵ Two years later Thaler, Tversky, Kahneman and Schwartz tested the idea in an experiment: subjects who got the most frequent feedback on their investments took the least risk and earned the least money.¹⁶

The frequency of bad news depends on how often you look. In Kenneth French’s US total-market series from 1927 to 2025, the market closed lower on about 45% of trading days, 37% of months, 32% of quarters and 24% of calendar years.¹⁷ An investor who checks daily sees a loss almost every other session. One who checks once a year sees a loss in about one year of four. If you want to keep the feeling in the tweet, checking less often is the cheapest way to do it.

When holding is the mistake

Not selling helps only when the thing you hold is worth holding at that weight. Several common situations call for a sale.

Holding losers to avoid admitting the loss. In Odean’s study of 10,000 brokerage accounts from 1987 to 1993, investors sold 14.8% of the gains available to them and 9.8% of the losses, and the winners they sold beat the losers they kept by about 3.4 percentage points over the following year.¹⁸ That reluctance to sell is the disposition effect, covered in Yes, an Unrealized Loss Is Still a Loss.
Holding single stocks forever. Bessembinder found that a majority of US common stocks since 1926 returned less than one-month Treasury bills over their listed lives, and that the best-performing 4% of companies accounted for the stock market’s entire net wealth creation.¹⁹ An index fund adds and drops companies by rule. A basket of stocks you never trade does not. See concentration risk and when to sell a winning stock.
Letting the allocation drift. A 60/40 portfolio that is never rebalanced through a long bull market ends up much riskier than the one you chose. Rebalancing means selling whatever has run up; see how often to rebalance.
Spending. Retirees sell to live. The decision is which asset to sell and in what order, which is where sequence-of-returns risk comes in.
Harvesting tax losses. Selling a fund at a loss and buying a similar but not substantially identical one keeps the market exposure and books the loss. The wash-sale rule disallows the loss if you buy substantially identical shares within 30 days before or after the sale, including in an IRA (IRS Publication 550). See tax-loss harvesting.

Write down your reasons to sell

The useful version of the tweet is a list of the reasons you will sell, written while markets are calm, plus a rule for getting back in if you ever sell for a reason that isn’t on it. Our household financial plan guide covers the research on why written if-then rules get followed more often than intentions.

Reason to sell	Example rule, written in advance	Read more
Allocation has drifted	Sell stocks back to 60% when they pass 65% of the portfolio	Should you rebalance now?
Spending in retirement	Each January, sell enough from the overweight asset to fund the year’s withdrawals	Safe withdrawal rate
A dated goal is close	Move a home down payment to Treasury bills once the purchase is under three years away	Where to park cash
One holding is too large	Sell employer stock down to a set share of net worth after each vest	Concentration risk
A tax loss is available	Harvest losses above a set dollar amount into a fund tracking a different index	Tax-loss harvesting
Prices fell, or a forecast sounds alarming	Not on the list. If you sell anyway, write the date you will buy back before you place the trade	Stop-loss orders for index investors

What we recommend

Keep the reflex and narrow the claim. For a diversified portfolio you can afford to hold through a long decline, not selling when prices fall is a good default, and most investors already follow it. Add a written list of the reasons you will sell, and a re-entry date for the day you break your own rule. Judge your temperament by what you did in the last bad market. How you feel during a good one tells you little.

Before you lean on calm as a reason to take more risk, check whether the portfolio fits your finances. Risk tolerance is how a loss feels; risk capacity is whether you can absorb it and still pay for what matters. Life-cycle finance covers the difference.

Frequently Asked Questions

How common is panic selling?

Uncommon. In a study of 653,455 brokerage accounts from 2003 to 2015, about 0.1% of investors were panic selling at any given time, rising up to threefold in large declines. Fidelity reported that about 1.6% of its 401(k) accounts sold all their stock between October 2008 and March 2009, and Vanguard found fewer than 1% of retail households left equities completely in the first half of 2020.

How much does panic selling cost?

It depends on when you get back in. In Fidelity’s data, savers who sold all their stock in late 2008 or early 2009 and stayed out saw balances rise 2% by mid-2011, against 50% for those who kept some stock. Those figures include contributions and compare self-selected groups. In the Elkind study, the median panic seller earned a zero to negative return afterward, and 30.9% had not returned to stocks by the end of 2015.

Is the behavior gap 1.2% a year?

That is Morningstar’s 2026 estimate across all US funds and ETFs. For US equity funds it was about 0.4 points. Morningstar notes that regular contributions and rebalancing can open a gap on their own, and a 2026 Financial Analysts Journal paper estimated the part due to poor timing at about 0.10% a year in the sample behind the 2025 edition.

Should I never sell stocks?

No. Rebalancing, spending in retirement, funding a dated goal, cutting a concentrated position and harvesting tax losses are all good reasons to sell. Write them down in advance so a falling market is not the trigger.

How can I tell whether I would panic sell in the next crash?

Your behavior in the last decline is better evidence than a questionnaire. In a large UK survey, standard risk-tolerance questionnaires did not reliably predict who would sell in a crash scenario, and in Italian bank data the share of clients wanting no financial risk rose from 16% to 43% between 2007 and 2009. If you have not held through a large drawdown, assume your tolerance is lower than it feels today.

Key Takeaways

Not selling is the norm. About 1.6% of Fidelity 401(k) accounts sold all their stock in the worst months of 2008 and 2009, and fewer than 1% of Vanguard retail households left equities in early 2020.
The cost sits with a minority. Fidelity savers who sold everything and stayed out were up 2% by mid-2011, against 50% for those who kept some stock, though the groups and contributions differ.
The average gap is small. Morningstar’s 2026 gap was about 0.4 points for US equity funds, and one 2026 paper puts the timing share of the overall gap near 0.10% a year.
Calm in a good market is weak evidence. The share of Italian bank clients wanting no financial risk rose from 16% to 43% between 2007 and 2009, and self-rated investing expertise went with more panic selling.
Check less often. The US market closed lower on about 45% of trading days from 1927 to 2025, and in about 24% of calendar years.
Sell by rule. Rebalancing, spending, dated goals, concentration and tax losses are reasons to sell; a falling price on its own is not one of them.

Related Guides

Do Investors Care About Risk-Adjusted Returns? on what crash selling, fund flows and the equity premium reveal about risk preferences.
Yes, an Unrealized Loss Is Still a Loss on why holding does not make a decline temporary, and the disposition effect.
What Wealthfront’s 9.8% Return Actually Measures for the full discussion of Morningstar’s gap and the 2026 critique.
Should Long-Term Index Investors Use Stop-Loss Orders? on selling by price rule and why the re-entry rule decides the outcome.
Missing the Market’s Best Days on the famous chart behind most stay-invested advice.
How to Write a Household Financial Plan for putting the sell rules above in writing.
The Engineer’s Guide to Systematic Investing for a one-page investment policy.

Sources

“401(k) holders who bailed on stocks in 2008 made out worse: Fidelity”, InvestmentNews, August 15, 2011. Reports Fidelity data on 7.1 million accounts; the 1.6% share is our division of the reported 117,000 by 7.1 million. We could not locate Fidelity’s original release.
Daniel Elkind, Kathryn Kaminski, Andrew W. Lo, Kien Wei Siah and Chi Heem Wong, “When Do Investors Freak Out? Machine Learning Predictions of Panic Selling”, The Journal of Financial Data Science 4, no. 1 (2022): 11–39. The 9% share (26,852 of 298,556 households) is from The Evidence-Based Investor’s summary of the paper. The 30.9% figure is measured as of December 31, 2015, so it counts investors who had not yet returned.
Vanguard, How America Invests press release, December 3, 2020. More than 5 million retail households, 2015 through the first half of 2020.
Stefano Giglio, Matteo Maggiori, Johannes Stroebel and Stephen Utkus, “The Joint Dynamics of Investor Beliefs and Trading during the COVID-19 Crash”, PNAS 118, no. 4 (2021): e2010316118. 67% of optimists, 73% of neutrals and 70% of pessimists did not change their equity share.
Laurent E. Calvet, John Y. Campbell and Paolo Sodini, “Fight or Flight? Portfolio Rebalancing by Individual Investors”, Quarterly Journal of Economics 124, no. 1 (2009): 301–348.
Arvid O. I. Hoffmann, Thomas Post and Joost M. E. Pennings, “Individual Investor Perceptions and Behavior during the Financial Crisis”, Journal of Banking & Finance 37, no. 1 (2013): 60–74.
Stefano Giglio, Matteo Maggiori, Johannes Stroebel and Stephen Utkus, “Five Facts about Beliefs and Portfolios”, American Economic Review 111, no. 5 (2021): 1481–1522.
“Study: 401(k) Investors Who Stayed the Course in 2008-09 Were Big Winners”, Steve Vernon, CBS News MoneyWatch, August 2011. Source for the 25% figure for savers who sold and later returned.
Jeffrey Ptak, Mind the Gap 2026, Morningstar, August 6, 2026. Ten years to December 2025; category gaps from Exhibit 4.
J. A. Fulkerson, B. D. Jordan, T. B. Riley and Q. Yan, “Bad Timing Does Not Cost Investors 15% of Their Funds’ Returns: An Examination of Morningstar’s ‘Mind the Gap’ Study”, Financial Analysts Journal 82, no. 3 (2026): 34–42.
Luigi Guiso, Paola Sapienza and Luigi Zingales, “Time Varying Risk Aversion”, Journal of Financial Economics 128, no. 3 (2018): 403–421.
Martin Weber, Elke U. Weber and Alen Nosić, “Who Takes Risks When and Why: Determinants of Changes in Investor Risk Taking”, Review of Finance 17, no. 3 (2013): 847–883.
C. Brooks and L. Williams, “When It Comes to the Crunch: Retail Investor Decision-Making during Periods of Market Volatility”, International Review of Financial Analysis 80 (2022): 102038.
Andrew W. Lo, Dmitry V. Repin and Brett N. Steenbarger, “Fear and Greed in Financial Markets: A Clinical Study of Day-Traders”, American Economic Review 95, no. 2 (2005): 352–359.
Shlomo Benartzi and Richard H. Thaler, “Myopic Loss Aversion and the Equity Premium Puzzle”, Quarterly Journal of Economics 110, no. 1 (1995): 73–92.
Richard H. Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz, “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test”, Quarterly Journal of Economics 112, no. 2 (1997): 647–661.
Kenneth R. French, Data Library, Fama/French research factors, daily and monthly, downloaded November 6, 2026. Market return is Mkt-RF plus RF for calendar years 1927 through 2025; quarters and years compound the monthly series. Our calculation.
Terrance Odean, “Are Investors Reluctant to Realize Their Losses?”, The Journal of Finance 53, no. 5 (1998): 1775–1798. Excess return over the following 252 trading days versus the CRSP value-weighted index.
Hendrik Bessembinder, “Do Stocks Outperform Treasury Bills?”, Journal of Financial Economics 129, no. 3 (2018): 440–457.

Editor’s note

Educational content, not investment advice. The studies above are observational, and each defines selling differently; none of them shows that a calm temperament causes better returns. The Fidelity figures are changes in account balances that include contributions. Figures from secondary coverage are labeled as such in the sources.