Instead of reacting emotionally to market swings, investors should pre-establish a specific, data-driven metric that will trigger a decision to sell or reallocate. This strategy, similar to Buffett's, ensures that choices are made from a place of sober analysis rather than fear or greed.

For endowments, compounding capital is key. A lower multiple returned quickly allows for redeployment, potentially generating a higher total return over the long term than a high-multiple fund that holds assets for 15-18 years.

Over half of equity funds are passive and up to 75% of trading is algorithmic. These systematic, unemotional approaches reduce herd behavior and panic-selling, leading to shallower market dips and faster recoveries, especially during geopolitical crises.

In venture capital, the greatest danger isn't investing at high valuations during a boom; it's ceasing to invest during a bust. The psychological pressure to stop when markets are negative is immense, but the best VCs maintain a disciplined, mechanical pace of investment to ensure they are active at the bottom.

Contrary to typical risk-off strategies, ARK Invest manages risk by concentrating its portfolio into its highest-conviction names during market downturns. Conversely, during bull markets, as opportunities like IPOs increase, the firm diversifies its holdings to capture broader upside.

By seeding new positions at ~0.5% and rarely exceeding 1% at cost, the fund mitigates the behavioral risk of averaging down too aggressively into a failing investment. This disciplined approach prevents a small mistake from becoming a large portfolio loss.

Pension funds use a fixed income allocation to enforce rebalancing discipline. When equities fall, the fixed income portion grows relatively, forcing a sale of fixed income to buy cheaper equities. This systematically forces investors to buy at the bottom and sell at the top.

Unlike LPs who passively delegate to fund managers, Baylor's CIO actively analyzes market psychology and makes allocation decisions, such as increasing investment in software during the 2026 downturn based on human behavior insights.

To ensure winning investments materially impact the endowment, Baylor reverses the typical allocation logic. It decides on a target dollar amount per underlying company (e.g., $3 million) and sizes its fund commitment accordingly, based on the fund's expected number of investments.