Don’t do something, just stand there!
With so much happening in the economy and market, volatility has become the new normal. AI is disrupting our careers, inflation is squeezing our wallets, and political chaos is filling our feeds. The natural human response to this much pressure is movement—changing jobs, moving money, or pivoting frantically. But as inflation ticks back up and the chaos deepens, the smartest move might be the one that feels most counterintuitive. To navigate this stress, I want you to master a new idiom: “Don’t do something, just stand there.”
A Bias for Action
This urge to move even when it is counterproductive is a psychological trap known as action bias. Consider the elite soccer goalkeeper. A study of 286 penalty kicks in elite soccer matches showed that keepers saved 33.3% of penalties when they stayed in the center, compared with 12.6% when they jumped right and 14.2% when they jumped left (source). Despite the data, most keepers still dive. We feel compelled to act even when there is no proof that it will lead to a better outcome (source). We respond to action as a default, feeling that inaction will be judged more harshly if things go wrong. In your financial life, action bias often manifests in three dangerous ways:
Hasty Decisions – Moving too quickly without proper research and thought about underlying risks.
Performative Changes – Shifting your asset allocation out of fear of missing out or to follow the herd.
Ill-informed Overstepping – Making decisions in areas where you lack expertise to make a good decision. Ill-informed overstepping is often worse than a hasty decision. It’s falling into the Dunning-Kruger effect zone, believing you know more than you do.
Let’s look at a few examples.
Navigating the Market Noise
You’ve set your asset allocation for a reason. There is no need to change it right now just because of headlines about AI stocks, gold, or Bitcoin.
Stay Strong – Fear of missing out is a powerful motivator of action bias. Resist the urge to jump on the bandwagon. Stay strong and keep the majority of your portfolio in low-cost, diversified investments.
If you can’t sleep at night – If the volatility in stocks worries you, you may be carrying too much risk with your portfolio. Instead of a hasty exit, talk to someone to gauge your risk appetite, shift your asset allocation to a level that helps you sleep at night, and then let the market do its thing!
Control what’s controllable – You cannot change the market; you can only change your reaction. Focus on understanding the investment’s value and its typical drawdowns (low points) in a downturn (and its high points in an upturn) so you aren’t surprised when they happen.
Stay Steady in a Shifting Job Market
For years, employees had the upper hand and could jump around. Times are tighter now, and the power dynamic is shifting to employers. Now is the time to protect your greatest asset: your ability to earn an income.
Stay Strong – Make yourself indispensable at work. Clearly define the value you provide to your client/employer, ensuring it isn’t a task that can be outsourced to AI.
If you can’t sleep at night – Now is not the time to give in to action bias, make a hasty decision, and quit. Data shows the job search is taking longer than it used to (source). So, start looking and don’t jump ship until you have a new role lined up and a fully funded emergency fund.
Build your safety net – Ensure your emergency fund covers 3 to 6 months of expenses and is stored in a safe location, such as a high-yield savings account, CD, or money market account. Check out my post on Emergency Funds for more details on deciding how much you should put into your fund.
Focus on your Fiscal Deficit
It’s easy to stress over the federal deficit, but you have much more control over your own balance sheet.
Stay Strong – Stick to your debt payoff plan and don’t take on any more debt. Hold off on big discretionary purchases, especially if you’re unsure about your job. Wait until you feel secure before making a large purchase.
If you can’t sleep at night – If fear of the unknown is keeping you up at night, automate your payments. Create a debt payoff plan that happens in the background, so that you don’t have to make a decision every month.
Handle Market Highs
Markets are at all-time highs. If you feel the urge to stop investing so you can buy the dip later, you don’t stand a chance. Even the most prolific investors can’t time the market. If you can, keep investing to reap the greatest reward.
Stay Strong – Continue your automated savings (401 (k) s, IRAs, Health Savings Accounts). Consistent participation is almost always better than trying to time the market.
If you can’t sleep at night – If you sold investments and are sitting on a large pile of cash but are afraid to dive in all at once, use Dollar Cost Averaging (DCA). By investing a percentage of the total on a fixed schedule, you remove the burden of choosing the right day. You can choose the percentage you feel comfortable with (maybe 10% in a month, 33% a year, etc.) and a timeframe. Then you stick to it regardless of anything else and move that money into an investment on a scheduled basis. The benefit is two-fold:
If the market goes down, your money buys more at a lower price, giving you more shares.
If the market goes up, you get the gains as you go, rather than the money sitting on the side, missing the gains.
Conclusion
Standing your ground in the center of the goal is often the best chance to block the shot. It isn’t the most exciting move, and it is not the easiest when everyone around you is shouting for you to dive. But often, it proves to be the best decision. In a world defined by volatility, remember, “don’t just do something, just stand there.”
Ultimately, you are the only one responsible for your financial decisions; take that responsibility seriously at all stages of your financial journey.
Sources
https://www.bps.org.uk/research-digest/dont-jump-advice-goalkeepers-economic-psychology
https://thedecisionlab.com/biases/action-bias
https://www.investopedia.com/dunning-kruger-effect-7368715
https://www.fastcompany.com/91255516/the-job-search-is-taking-longer-than-it-used-to