Severe losses, though, seem to be scarier when one is closer to retirement. “Let's be honest, if you lose some money when you're 30, it's no big deal,” Blanchett said. “You have time to make up for it. As you approach retirement, the impact of the losses becomes much more real.
“People who should be better investors are making worse decisions because of fear,” he added.
Larry Swedroe, chief research officer at Buckingham Strategic Wealth in Clayton, figures gray-haired investors also were spooked by headlines about the worsening pandemic. It seemed like a new kind of shock, different than previous market sell-offs.
“They had seen in 2008 how bad the market could get,” he said. “They might think, 'This looks like it could get a lot worse, and I can't afford it.'”
Swedroe believes there's an important lesson to be learned from last year's brief but painful bear market: If you panicked and sold near the bottom, you had too much money in stocks in the first place.
“If you had 50% equities and that kind of shock is going to cause you to panic and sell, you shouldn't be 50% in equities, you should be less,” Swedroe said.