Three mistakes investors make in selloffs

Key points

Big selloffs often reflect market mechanics, not broken long-term theses: Sharp drops in any crowded, liquid area (equities, tech, commodities) can spill into other assets via de-risking, liquidity selling, and USD/rates repricing— without changing the long-term fundamentals.

Diversification doesn’t mean zero volatility: In stress, correlations rise and even “defensive” holdings can wobble. If volatility forces decisions, the issue is usually sizing and process, not whether you picked the “wrong” asset class.

The biggest risk is turning short-term volatility into a permanent decision: Successful long-term investors rebalance exposure, not emotions. A bad week tests discipline – it doesn’t require perfect timing or a new narrative.

What the Silver and precious metals slide tells us about cross-asset volatility

If you’ve been watching markets lately and thinking, “Why is everything moving at once?” — you’re not alone.

The recent drop in silver and precious metals matters beyond metals itself because sharp moves in a “big, liquid” market can spill over into other assets. Here’s the investor-friendly version of what’s going on:

• Metals are widely held and widely traded, often with leverage in parts of the market.
• When prices fall quickly, it can trigger margin calls, forced selling, and de-risking.
• And when investors need cash fast, they often sell what they can, not necessarily what they want — which can pressure other liquid markets too (equities, FX, even parts of credit).
• Add in a volatile mix of USD and rates repricing, and you get the classic cross-asset effect: volatility doesn’t stay in one corner.

So even if you don’t own silver, a sharp move in metals can still show up as wider swings across portfolios.

For long-term investors, the key is not to get pulled into the “everything is breaking” narrative. Selloffs are stressful, but they’re also revealing: they show where process is strong — and where behaviour can cause avoidable damage.

Here are three common mistakes selloffs expose — and the simple mindset shifts that help avoid them.

Mistake 1: Treating a big move as a new long-term truth

Sharp price moves look like information — but speed doesn’t equal significance.

Metal selloffs can be driven by short-term forces:

• Positioning and leverage unwinds after a strong run.
• Sudden shifts in rates or the US dollar.
• Investors selling liquid assets to raise cash.

These drivers can dominate for days or weeks without changing the longer-term role metals may play as a diversifier.

A useful discipline:

Before acting, write one sentence:
“What changed, and will it still matter in 6–12 months?”

If you can’t answer clearly, the move is probably market mechanics, not a structural verdict.

Mistake 2: Expecting diversifiers to be calm all the time

Gold and silver are often treated as “stability assets,” but in stressed markets they can drop sharply — especially when:

• The US dollar strengthens.
• Real yields rise.
• Cash-raising turns into forced selling.

That doesn’t mean diversification failed. It means stress changes behaviour: investors sell what’s liquid.

The real test:

If a 10–20% swing forces an emotional decision, the issue is usually position size, not asset choice.

Mistake 3: Turning volatility into a timing decision

This is the most damaging mistake — and the most common.

Many long-term investors sell during selloffs not because their thesis changed, but because discomfort did. The idea is often “I’ll re-enter later,” but re-entry rarely happens cleanly — and markets don’t ring a bell when the dust has settled.

Volatility turns temporary moves into permanent portfolio decisions.

A better response:

• Don’t rebalance your emotions.
• Rebalance your weights.

If an asset still belongs in a long-term plan, the question is often how much, not whether.

Why boring often works better than bold

The most resilient portfolios are rarely exciting. They’re built around:

• Diversification across drivers.
• Conservative sizing.
• Periodic rebalancing.
• Patience through uncomfortable periods.

Selloffs are less a test of market knowledge and more a test of discipline. Consistency usually matters more than conviction.

The bottom line for long-term investors

If you bought metals as part of a multi-year strategy:

• A volatile week doesn’t require a new narrative.
• A sharp drawdown doesn’t demand perfect timing.
• And a selloff doesn’t invalidate diversification.

The investors who compound successfully over time are not the ones who avoid every drawdown — they are the ones who avoid turning drawdowns into decisions they can’t undo.

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