Activity Bias: When Doing Nothing Is the Hardest Thing to Do
Video Timestamps
00:00 – 04:58: What Is Activity Bias?
04:59 – 08:26: The Israeli Goalie Study and the Urge to Act
08:27 – 10:36: The Stress of Uncertainty
10:37 – 14:36: Regret and Loss Aversion
14:37 – 20:31: What You Should Do Instead
Welcome to The Trusted Room, a series about the conversations that really matter. So much of the financial industry focuses on the math, portfolios, markets and returns but the conversations clients thank you for are about family, purpose and the things money can’t measure. We created The Trusted Room to bring those conversations out into the open.
In this video, SVP Director Wealth Strategy, Joe Maier and CIO, Dominic Ceci discuss one of the most destructive behavioral biases in investing: Activity bias. They cover why we feel compelled to do something, even when we know doing nothing is the better choice, using a surprising study on Israeli soccer goalies, a relatable New York traffic-light example and the psychology of regret and loss aversion.
5 Key Takeaways
1. Doing nothing is often the optimal move
The research is clear: When markets get volatile, the statistically best move is usually to stay calm, stay patient and stay invested. But that’s exactly what makes activity bias so difficult — we know the right thing to do and we still can’t bring ourselves to do it.
2. The Israeli goalie study says it all
Five Israeli psychologists studied penalty kicks and found that goalies who simply stood in the middle of the goal blocked materially more shots than those who dove left or right. When asked why they keep diving, one goalie’s response captured the whole problem: “I can’t just stand there and do nothing.” He knew it was suboptimal. He did it anyway.
3. We all push the walk button
It’s the New York traffic light effect. People push the walk button even though they know it doesn’t actually make the light change faster. The action itself feels productive, even when it accomplishes nothing. Investors do the same thing: Trade, sell and rebalance because sitting still feels unbearable.
4. It’s driven by regret, loss aversion and uncertainty
The human brain is wired to look at how things are right now, not how they’ll be in the future. When investors sell during a drawdown, they’re eliminating the agony of uncertainty. They’d rather lock in a known loss than sit with not knowing.
5. The fix: A plan and an “activity account”
The antidote is a well-defined plan where you understand which assets match up with which goals. And for investors who know they’ll feel the itch to act no matter what: Carve off a small slice, say 2% of assets, into a separate account you can “push the button” on.
Frequently Asked Questions
Activity bias is the urge to take action even when doing nothing is the better choice. It shows up when investors trade, sell or tweak portfolios during periods of stress — not because the math supports it but because sitting still feels uncomfortable. The cost is real because more activity often means worse risk and returns.
Yes, the two terms describe the same behavior. Some researchers and behavioral economists use "action bias," others use "activity bias." Both explain how we'd rather act and be wrong than sit still and watch. In a portfolio, that instinct tends to cost you money.
Because of regret aversion and loss aversion. A loss is about twice as painful as a gain is pleasurable and the brain is wired to focus on how things feel right now rather than how they’ll look in the future. Selling during a drawdown eliminates the uncertainty — you know the pain you’re realizing and there’s no more not-knowing. The relief is emotional, not financial.
A few signals are worth watching. You check your accounts more often when markets are down. You make changes after a drop rather than before one. You can't connect a recent trade to a specific goal in your plan. Or you've moved to cash and are waiting for the "right" moment to get back in. If any of these sound familiar, activity bias is probably driving the decisions.
Yes, but the changes should come from your plan, not from panic. A well-defined plan with clear goals tells you when a change is warranted versus when you’re just reacting to stress. The goal isn’t to never act; it’s to make sure your actions are driven by strategy, not by the discomfort of doing nothing.
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