The Cost of Emotions in Investing – And Why at arvy We’re on This Journey Together

arvy's Teaser: The most expensive fee in investing doesn't appear on any statement. It's called: you. Studies show the average investor loses 3% in returns per year — not from bad products, not from fees, not from bad luck. From emotional decisions. Panic selling, market timing, sitting in cash too long. On a CHF 200,000 portfolio over 20 years: a difference of over CHF 200,000. This article shows the 5 most expensive emotional mistakes — with concrete CHF price tags. And what you can do about it.

The Invisible Fee: 3% Per Year

Every year, JP Morgan publishes a study comparing 20-year returns across asset classes. At the very bottom of the list: the average investor. Not because markets performed poorly — but because they bought and sold at the wrong times.

Over 20 years (2002–2021), the S&P 500 averaged ~9.5% per year. The average investor: ~3.6%. A gap of nearly 6 percentage points. In crisis periods, it gets even worse.

The 5 Most Expensive Emotional Mistakes — With Price Tags

Mistake 1: Panic selling in a crash

March 2020. Covid. The market drops 34% in 23 days. Your CHF 200,000 portfolio is suddenly CHF 132,000. You sell. You want to "wait until things settle down."

5 months later the market is back at pre-crisis levels. 12 months later it's 20% higher. But you're still in cash — because getting back in "doesn't feel right yet."

Cost of a single panic sell: CHF 65,000–105,000.

Mistake 2: Market timing — waiting for the "right moment"

"The market's too high right now." "I'll wait for a pullback." "After the elections." "After the rate decision." People have been saying this for decades — and most miss the best days of the market while waiting.

Cost: CHF 100,000+ over 20 years on a CHF 200,000 portfolio.

Mistake 3: Sitting in cash too long

You inherited CHF 100,000. Or cashed out your 3a. Or took your pension fund as a lump sum. The money sits in a savings account "until you decide." Weeks become months. Months become years.

CHF 100,000 in savings at 0.75% interest and 1.5% inflation: CHF 750 real loss per year. Invested at 6%: CHF 6,000 growth per year. The difference: CHF 6,750 for every year you wait.

3 years waiting: ~CHF 20,000 in missed growth. (→ The Cost of Waiting)

Mistake 4: Performance chasing — following the trend

Crypto rises 300%. AI stocks double. Your neighbour brags about Nvidia gains. You restructure your portfolio, buy at the peak. 6 months later: −40%.

The data is clear: funds with the highest inflows (the ones everyone buys) almost always underperform the market over the following 3 years. You buy what's popular — not what works long-term.

Cost: 2–4% underperformance per year across the cycle.

Mistake 5: Checking your portfolio too often

Sounds harmless. It isn't. Studies show: the more often investors check their portfolio, the worse they perform. If you check daily, you see red numbers ~46% of the time. If you check quarterly: only ~25% of quarters. Annually: only ~27% of years.

Frequent checking amplifies loss aversion. You feel losses twice as strongly as gains (Kahneman & Tversky). The result: more emotional reactions, more trades, worse returns.

Why Your Brain Works Against You

Reacting emotionally to falling prices isn't weakness. It's evolution. Your brain is wired to avoid losses — because losses on the savannah meant death. On the stock market, they mean a temporary number on a screen.

Three cognitive biases that cost you money:

Loss aversion: A CHF 10,000 loss hurts twice as much as a CHF 10,000 gain feels good. That's why people sell at a loss — to stop the pain — instead of holding.

Recency bias: What's happening now feels like it will continue forever. Crash? "The market will never recover." Rally? "It can only keep going up." Both wrong, both expensive.

Herd mentality: When everyone's selling, you feel foolish holding. When everyone's buying, you feel foolish staying out. The herd is almost always wrong — especially at turning points.

What Actually Helps: The 5 Defence Mechanisms

Why arvy Works Differently

Most investment apps are optimised to make you look as often as possible. Push notifications on every price jump. Red and green numbers in real time. Gamification. That's not a coincidence — it's a business model. More engagement = more trades = more fees.

arvy does the opposite.

We invest alongside you. Same strategy, same portfolio, same volatility. When the market drops, we lose too. That's why we stay calm — not because we don't care, but because we understand it's part of the process.

We explain instead of alarming. No push notifications at −2%. Instead: regular updates that provide context rather than panic. The arvy Weekly newsletter. Quarterly reports. Blog articles that give perspective, not fear.

We keep you invested. That sounds simple. But it's the most important thing an asset manager can do. The first rule of compounding: never interrupt it.

"The greatest risk in investing isn't the next crash. It's your reaction to it. Those who stay invested, win. Those who panic sell pay the highest price — and it never appears on any statement."

The Reassuring Perspective

Since 1950, global stock markets have had 12 bear markets (declines >20%). Every single one was followed by a new all-time high. Average duration of a bear market: 14 months. Average duration of a bull market: 6 years. In bull markets you earn far more than you lose in bear markets — but only if you stay invested.

Investing isn't a sprint. It's a marathon. And in a marathon, you don't win by stopping at every gust of wind — you win by keeping your pace and running through it.