Investors over-estimate their tolerance for risk.

It’s easy to feel like a genius in a bull market – but it’s only after you lose big money will you understand what it’s like to be on the wrong side of a market.

It’s not just the financial loss you take – it’s the emotional toll that losing money takes on you, which can be significant.

History Lesson

Home prices in California peaked in 2006 and then proceeded to fall 41% before they hit bottom in 2012. (Source: FHFA).

That means a 70% gain was required to recoup your losses and get back to break-even.

To make matters worse, it took 12.5 years before CA home prices returned to their 2006 peak.

That’s why the first rule of money is don’t lose it.