The longest running disagreement between me and some of the readers in this forum concerns my persistent warnings that investors are prone to sell low in panic and buy high in euphoria, and the ensuing resentful rebuttals I get from an army of disciplined DIYers. That this type of statement elicits indignation merely reinforces my view that there is an underlying emotion animating the response - that is, a deep-seated fear that panic-selling could happen to the one denying it.

(Some of these commenters dress up their rebuttals in the form of how dare you suggest investors need an advisor? but those reading my posts carefully enough understand that I am agnostic about the form of help people get and recognize that some people dont need any.)

It is with this background that I commend to your attention a must-read article by Erik Conley, who relays with uncommon honesty the story of how his panic on March 3, 2009, as the market plumbed new lows (after cascading downward for over a year) prompted him to call his broker to sell everything.

Most Seeking Alpha readers will recognize the date as being just days before the all-time market low during the last financial crisis. Whats important also to know is that Conley is not just your average working stiff. Hes a professional investor! And, as is evident from his writing, hes highly intelligent as well. This is no surprise to me, since I have repeatedly warned that the most intelligent people are precisely the most vulnerable because their fertile minds can quickly spin a compelling narrative that makes sense of why things are going down, and must continue to do so. Indeed, Conley alludes to this when he interprets a downward trending stock chart on CNBC as follows (with my emphasis added):

I began to imagine scenes of widespread panic like those old newsreels from the Great Depression of the 1930s. I imagined crowds of people lined up in front of banks desperately trying to get their money out before the bank collapsed. I saw bread lines and soup kitchens. And I saw myself, living in a van, down by the river. At that moment, I was in full panic mode."

Conley was fortunate that when he implored his broker to sell, saying I don't care what the price is, just get me out! his long-time associate tried hard to walk him off the ledge. He couldnt convince him not to sell everything but got Conley to agree to sell only half. When Conley came to his senses, he called back and re-bought everything. The cost of this investment roundtrip was 1.75% of his portfolio - not a bad price for such a valuable lesson. How costly it would have been had he missed out on the ensuing eight years of market price appreciation.

If Conley - a market veteran - can fall into the No. 1 investing trap, certainly anyone can. He chalks it up to the inescapability of being human:

I had acted irrationally, but I just couldn't see it at the time. I'm only human, after all, and humans panic sometimes. But I'm also an experienced, professional investor. I should have known better."

Thats true enough. Im less convinced, though, by another point he makes, suggesting that he got caught off guard while on vacation and away from his normal surroundings, computer and investment plan:

Had I taken the time to consult the part of my written plan that spells out how to deal with big market declines, I would have been more rational, and it's very unlikely that I would have made that panic sale.

The problem with this there is always a time of vulnerability. If it wasnt on March 3, it could have been on March 4. Elazar Advisors, LLC has commented that his trading advice service is premised on the knowledge that someone who is sitting alone making investment decisions is bound to crack up at some point from the psychological pressure that is most acute when by oneself. I think this applies to everyone to a greater or lesser extent - we all are prone to heeding inner messages emerging from the wellsprings of our sometimes irrational fears, hopes or desires.

That inner voice can convince you to shred that investment plan. That could have happened perhaps even more easily had Erik Conley seen the same screen on the same day back at home. Having his broker, partner and friend, on the other line kept the cost of his investment lesson to 1.75% of his portfolio rather than 3.50%. People need people - in all areas of life, not just investments. Whether you employ an advisor, enlist a knowledgeable friend or make sure you and your spouse are mutually committed to that investment plan, youre likely to lose less and gain more with a partner.

Postscript

It is with this perspective in mind that I want to notify readers of a new premium service on Seeking Alphas Marketplace called Wealth Watchers, designed for people who want something in between engaging a financial advisor and doing things completely on their own. The new forum will serve as a mutually supportive peer group with knowledge and perspective on the how-tos of earning, saving and investing with the aim of achieving financial independence.

Please share your thoughts in our comments section. Meanwhile, here are a few advisor-related links for today:

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Anatomy Of A Panicked Reaction: Financial Advisors' Daily Digest - Seeking Alpha