In the first week of April 2025, as new US tariffs hit markets, retail investors in US stocks sold a net $7.5 billion, then switched to buying later in the month (S&P Global Market Intelligence, May 2025). Whether either move was right depended on what happened next, which nobody knew at the time. That is the honest starting point for any guide about losses.
What this page can do is help you separate the decisions that are forced on you (margin, cash needs, fraud) from the ones that are not, and show what research on investors after large losses has found. It is the practical companion to our analysis, Why Most Stock Investors Lose Money: What the Evidence Actually Shows.
Every step carries a label for how strong the evidence is: Measured outcome data exists; Official advice a public body recommends it but its effect is rarely measured; Untested sensible, but we found no study. Hover or tap a label for the definition.
Before: write the rules down while you are calm
- Write down when you will need the money, and how large a fall you could sit through without selling. Untested A rule you made in a calm month is easier to follow than one you make in a falling one.
- If you use margin, read the terms now. Official advice Your firm may sell some or all of your securities without consulting you, you can lose more money than you invested, and you are not entitled to extra time on a margin call. Investor.gov
- Check what your funds actually hold. Measured The ten largest holdings of the S&P 500 made up 40.8% of the index when our analysis was written, so three different US funds can mean the same companies three times.
- Decide in advance what would make you change your mind about an investment. Untested A fact that would prove you wrong, not a price that would make you nervous.
If it happens: look at the account before the headlines
The research on panic selling is clear about one thing: it is common, and it clusters. Among 298,556 US households with brokerage accounts from 2003 to 2015, 9.0% made at least one panic sale (selling off most of their stocks within a month), and the rate rose to up to three times normal during sharp market falls (Elkind et al., 2021).
- Check for a margin call first. Measured If you are near your limit, that decision may be made for you. In China’s 2015 crash, margin accounts close to their limits sold heavily, the stocks they held fell further than others, and then the prices reversed (Bian et al., 2018).
- Check the cash you need in the next few months, and where it will come from. Untested Separate that from the rest.
- Count trades as well as prices. Measured Among 66,465 US households, the most active fifth trailed the market by about 6.5 percentage points a year, and the gap was trading costs. see our analysis
- Ask whether the reason you bought has changed, or only the price. Untested Write the answer down; it will be useful later.
Afterwards: the arithmetic, and the urge to win it back
Losses and gains are not symmetrical. The gain needed to get back to where you were is larger than the loss, and the gap grows quickly.
| Loss | Gain needed to get back |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 30% | 42.9% |
| 50% | 100% |
| 75% | 300% |
| 90% | 900% |
The formula is gain needed = 1 ÷ (1 − loss) − 1. It describes the past, not the future: it says nothing about how long a recovery will take, or whether it will happen.
- Notice the urge to win it back quickly. Measured Using Swedish portfolio records, one study found investors who lost 50% or more in a year raised their holdings of lottery-like stocks by about 1.5 percentage points on average, and were about 3 percentage points more likely to buy them. The author stresses that the effect is modest (Stålnacke, 2024).
- Keep a short record of what you bought, why, and what happened. Untested It is the only way to tell bad luck from a bad rule.
- If you sold, decide how you would get back in before you need to. Measured Of the households that panic sold, 30.9% had not bought risky assets again by the end of the study; of those who did return, most did so within one to five months (Elkind et al., 2021).
- Ask about tax treatment where you live. Untested How losses are treated differs by country and account type. We do not give tax advice.
What not to do
- Do not borrow to win a loss back. Official advice With margin, a further fall can be sold for you at the worst moment, and you can owe more than you put in. Investor.gov
- Do not take tips from someone who contacts you offering to recover losses. Official advice Investment losses attract recovery scams. See our scam response guide.
- Do not make the decision at 2am. Untested Nothing in the evidence says when to sell. A rule written in advance is the closest thing we have.
Checklist
- I know whether I use margin or leverage, and how close I am to a call
- I know how much cash I need in the next six months, and where it will come from
- I have checked what my funds actually hold, not just their names
- I have written down why I bought each holding, and what would change my mind
- I counted my trades this month as well as my losses
- I have a rule for getting back in if I sold
- I have not borrowed to recover a loss
Where you live
| United States | United Kingdom | Australia | |
|---|---|---|---|
| Regulator’s investor information | Investor.gov (SEC) | FCA consumer pages | ASIC Moneysmart |
| If you suspect investment fraud | ReportFraud.ftc.gov and the SEC | Report Fraud | Scamwatch |
How strong is the evidence?
The research describes what investors do after losses much better than it tells anyone what to do. The panic-selling study is careful on this point: the returns panic sellers gave up were highly correlated with what the market did next, so selling looked wise after some falls and costly after others (Elkind et al., 2021). The median panic seller made zero to negative returns while out of the market, which argues against treating a panic sale as a clever trade, but it does not prove that holding is always right.
The loss-chasing effect is real but small, and the data run only to 2007 (Stålnacke, 2024). The margin evidence comes from one unusual market, China in 2015 (Bian et al., 2018). We label these steps measured because there is outcome data behind them, not because the question is settled.
Read next
This guide is general information, not financial, investment or tax advice, and it does not recommend buying or selling any security. It describes checks and what published research has found. For decisions about your own money, speak to a regulated adviser.
Sources
- Elkind D, Kaminski K, Lo AW, Siah KW, Wong CH. When do investors freak out? Machine learning predictions of panic selling. Journal of Financial Data Science 2021. doi:10.3905/jfds.2021.1.085
- Stålnacke O. Do individual investors gamble to recoup losses? Applied Economics Letters 2024. doi:10.1080/13504851.2024.2371511
- Bian J, He Z, Shue K, Zhou H. Leverage-induced fire sales and stock market crashes. NBER Working Paper 25040, 2018. doi:10.3386/w25040
- U.S. Securities and Exchange Commission. Investor Bulletin: Understanding margin accounts. Accessed 14 October 2026.
- S&P Global Market Intelligence. US retail equity investors bounce from heavy selling to buying in April. 13 May 2025.
- ROR Labs. Why most stock investors lose money (household trading, index concentration and recovery arithmetic, with sources).