Market turmoil can make even the most seasoned investors second-guess their strategy. I’ve spent decades helping clients navigate market cycles, and one of the most common and costly mistakes I see is what behavioral finance calls the “snake bite effect.”
After experiencing a significant loss in a specific stock or sector, an investor becomes excessively risk averse — much like someone bitten by a snake who then fears all tall grass. The pain of the past loss distorts future decision-making.
Instead of assessing opportunities rationally, they avoid anything that resembles the investment that caused the pain.
