Why Learning to Endure Losses Might Be the Most Underrated Financial Skill
Is investment loss a disaster—or part of the plan?
Many people treat investment losses as failure, but in reality, they’re simply the cost of building long-term wealth. In The Psychology of Money, Morgan Housel emphasizes that “you have to be able to survive losses to stay in the market.” If you exit too early out of fear, you miss the compounding effect that only rewards those who stay the course.
1. Losses Are Tuition: What I’ve Learned
In March 2020, at the height of pandemic fear, I sold some of my stocks. It felt like the safe thing to do—but months later, as the market recovered, I realized I had missed a powerful rebound. That experience became a turning point in how I approached investing.
Now, I look for buying opportunities in downturns, and I only invest amounts I can afford to see decline. I’ve learned that losses aren’t failure—they’re feedback.
Whenever I receive a bonus or extra income, I place a limit buy order for a stock I’ve been monitoring, at a price I’ve pre-determined. If that price hits, the purchase happens automatically. It’s like a "future flex purchase" for myself—except instead of clothes or tech, I’m buying time and security.
When investing in individual stocks, I only choose the top player in a sector. If the leadership changes, I sell and buy the new #1. That way, I avoid emotional attachment and minimize the fear of holding a company that might fail. For everything else, I stick with my S&P 500 ETF.
2. Risk Management for U.S. Millennials and Gen Z
If you’re in your 20s or 30s, investing can feel overwhelming—especially in a volatile economy. Here are a few simple strategies that work for me:
Emergency Fund First: Before investing, I saved 3–6 months of expenses in a high-yield savings account.
Set-and-Forget S&P 500 Investing: I use Charles Schwab’s automatic investing feature. When prices fall, I just buy more.
Pre-Loss Simulation: Before any investment, I mentally simulate a 20% drop. If I wouldn’t panic, I proceed.
Emotional Discipline: I check my portfolio just once a month and write a short investment journal to keep my decisions rational.
3. Staying in the Market Wins the Game
The S&P 500 has survived countless crashes but grown steadily over the long term. According to Fidelity’s 2023 report, investors who avoided market timing and stayed consistent saw the highest returns. Losses are inevitable—but only those who stay in the game enjoy the benefits of compounding.
You can’t control the losses, but you can control your response. When you expect some decline and plan for it, every dip becomes part of your long-term strategy.
This post is inspired by key ideas from The Psychology of Money, reinterpreted through the author's personal lens. No direct quotes are used. All rights belong to the original author.
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