Selling in a panic when markets fall
The mistake
Markets fall sometimes — that is normal, not a signal to run. The biggest and cheapest mistake is selling everything during a crash: it locks in the loss and makes you miss the recovery that usually follows.
The fix
If your money is invested for the long term, treat a bad year as something to sit through, not sell into. This is exactly why the earlier steps — an emergency fund, a clear time horizon, honest risk tolerance — matter so much: they are what make sitting through a crash possible.
A concrete example
An investor who stays invested through a sharp market drop and its recovery ends up roughly where the market ends up; one who sells at the bottom out of panic locks in the loss and then has to decide when to buy back in — a decision that is, in practice, extremely hard to time well.