Regret Aversion: Why Fear of Being Wrong Keeps Canadians in Cash Instead of XEQT

My younger sister has $53,000 sitting in a high-interest savings account earning about 3%.

She told me, unprompted, at a family dinner last spring. She had been reading about investing, she had heard me talk about XEQT more times than she could count, and she even had a Wealthsimple account on her phone. She was ready. Or so I thought.

“I just keep thinking,” she said, pushing pasta around her plate, “what if I put it all in and then the market crashes the next day? I would never forgive myself.” I started to explain that time in the market beats timing the market, that corrections are temporary, that she was losing money to inflation every single day she waited. She nodded at all of it. She agreed with all of it. And then she said the thing that made everything click for me: “I know you’re right. But I’d rather miss out on gains than feel like an idiot for investing at the wrong time.”

That sentence stopped me cold. She was not afraid of losing money – she could handle a temporary dip intellectually. What she could not handle was the idea that she had made a decision and it turned out to be wrong. She was not suffering from loss aversion. She was suffering from something subtler and, in many ways, more paralyzing: regret aversion.

1. What Is Regret Aversion?

Regret aversion is a cognitive bias where people avoid making decisions – or delay them indefinitely – because they fear regretting the outcome. It is not about the outcome itself. It is about the anticipated emotional pain of looking back and thinking, “I should have done something different.”

This is an important distinction. Loss aversion is about losses hurting roughly twice as much as equivalent gains feel good. That is a bias about outcomes. Regret aversion is about decisions. It is the fear of being the person who made the wrong call. It is the dread of future self-blame.

Think of it this way: loss aversion says, “I don’t want to lose $5,000.” Regret aversion says, “I don’t want to be the person who chose to invest $50,000 right before a crash.” The loss is the same in both cases. But regret aversion adds a layer of personal responsibility that makes the pain even worse. It is not just that something bad happened – it is that you caused it by making a choice.

Psychologists Daniel Kahneman and Amos Tversky identified this dynamic in their research on decision-making: people experience significantly more emotional pain from bad outcomes that result from action than from inaction, even when inaction costs more money.

This is the engine behind my sister’s paralysis. She would rather accept the slow, invisible erosion of her purchasing power than risk the vivid pain of having invested at the “wrong” time. The savings account is quietly costing her thousands a year. But it will never make her feel stupid. And for a regret-averse brain, that trade-off feels perfectly rational.

2. The Two Types of Regret That Govern Your Financial Life

Psychologists distinguish between two forms of regret, and understanding both is essential for understanding why so many Canadians are stuck in cash.

Regret of Commission (Action)

This is the regret you feel when you did something and it went wrong. You made a choice, you took action, and the outcome was bad.

• “I invested $10,000 in XEQT last month and it dropped 15%. I should have waited.”
• “I moved my emergency fund into the market and now I need the money but my portfolio is down.”
• “I bought at the peak. I knew I should have waited for a dip.”

Regret of commission is vivid, personal, and easy to replay. You can point to the exact moment you made the decision. The counterfactual – “if only I hadn’t…” – is clear and painful.

Regret of Omission (Inaction)

This is the regret you feel when you failed to act and missed an opportunity.

• “I had $50,000 in cash for three years while XEQT grew 30%. I left $15,000 on the table.”
• “I kept saying I’d invest next month, and now I’ve missed two years of growth.”
• “I was going to start buying XEQT in 2020 but the pandemic scared me off, and then it doubled.”

Regret of omission is real, but vague. There is no single moment to point to, no clear “decision” to blame. The loss is invisible, spread out over months and years, and it never shows up as a red number on a screen.

The Critical Asymmetry

Here is the finding that explains why so many people are stuck: most people feel significantly more regret from commission than from omission, even when omission is more expensive.

When researchers present scenarios where action leads to a bad outcome versus inaction leads to an equally bad (or worse) outcome, participants consistently rate the action scenario as more painful. The person who invested and lost $5,000 feels worse than the person who failed to invest and missed $8,000 in gains – even though the second person is objectively worse off.

This asymmetry keeps people frozen. Your brain protects you from the sharper pain of commission at the expense of the larger pain of omission. It would rather you lose $15,000 slowly and invisibly over five years in a savings account than risk a $5,000 visible paper loss. By trying to avoid regret, you are almost guaranteeing the more expensive outcome.

3. How Regret Aversion Shows Up in Canadian Investors

Regret aversion does not announce itself. It hides behind reasonable-sounding explanations. Here are the most common ways I see it play out.

• “I’ll wait for a dip.” This sounds like a strategy, but it is usually regret aversion in disguise. What you are really saying is: “I cannot handle the thought of investing today and seeing it go down tomorrow.” You are not making a market call. You are avoiding a decision that might produce regret.

• “I need to do more research first.” If you have been “researching” XEQT for six months, you are not doing research. You are experiencing analysis paralysis fuelled by regret aversion. You already know what to do. You are just afraid to do it.

• “I’ll invest when things settle down.” Things never settle down. There is always a war, an election, a tariff, a pandemic, or a recession scare. If you are waiting for a calm market, you are using world events as a socially acceptable excuse for what is actually regret aversion.

• “My friend invested at the worst time and lost a ton.” Hearing someone else’s regret story reinforces your own. That vivid tale of someone who “got burned” outweighs the thousands of boring stories of people who invested, held, and quietly built wealth over decades. Nobody tells those stories at parties.

4. The Real Cost of “Playing It Safe”

Let me show you what regret aversion actually costs. Here is $50,000 in a HISA at 3% versus $50,000 in XEQT at a historically reasonable 8.5% average annual return.

Read that last line again. Over 30 years, the difference is over $455,000 on a single $50,000 starting investment. That is the cost of regret aversion. That is what the fear of being wrong actually costs.

And this table actually understates the damage because it does not account for taxes on HISA interest (which is taxed as income at your marginal rate) or the fact that XEQT gains inside a TFSA or RRSP can grow tax-sheltered.

Now consider: the worst single-year decline for a globally diversified equity portfolio in modern history was roughly 35-40%. Even in that absolute worst case, a $50,000 investment drops to about $30,000. Brutal. But look at the table – even after that catastrophic drop, a few years of recovery would put you ahead of where the savings account lands after a decade. The temporary pain of a crash is dwarfed by the permanent cost of sitting in cash. But regret aversion can only see the vivid horror of a decision that went wrong in the short term.

For a deeper look at what delay costs, see my post on the cost of waiting to invest.

5. Why Regret Aversion Hits Canadian Investors Especially Hard

There are several reasons this bias is particularly potent in Canada.

Cultural conservatism around money. Canadians tend to be more conservative with personal finances than Americans. Investing in equities, even through a diversified ETF like XEQT, is still perceived by many as “gambling.” If you invest and lose money, people nod knowingly and say, “Should have kept it in savings.” If you stay in cash and miss gains, nobody says anything because they did the same thing. The social cost of being wrong is asymmetric.

CDIC insurance creates a false sense of safety. Canadian deposits up to $100,000 are protected by CDIC. This makes savings accounts feel government-backed and safe – and they are, safe from losing nominal value. But not safe from inflation. A savings account earning 3% when inflation runs at 2-3% is barely treading water. CDIC protects your dollars but not your purchasing power. Regret-averse investors cling to this guarantee because the number in their account never goes down, even as its real value quietly shrinks.

Crash headlines stick; recovery headlines don’t. Everyone remembers the 2008 financial crisis and the COVID crash. These events are vivid and easy to recall. What nobody remembers is the boring, steady recovery that followed each one. When you are deciding whether to invest, your brain pulls up crash memories – and regret aversion whispers, “Do you really want to be the person who bought right before that?”

The social accountability factor. When you keep money in a savings account, nobody questions you. But the moment you invest, you have made an active choice you can be judged on. This is status quo bias reinforcing regret aversion – the default shields you from social judgment while the active choice exposes you to it. For a deeper look at how cash products compare to XEQT, see my posts on XEQT vs GICs and XEQT vs HISA ETFs.

6. The Irony: Staying in Cash IS a Decision

This is the single most important reframe I can offer, and it is the one that finally got through to my sister.

Not investing is not the absence of a decision. It is an active decision to hold cash.

When you have $50,000 in a savings account and you choose not to invest it, you are not “doing nothing.” You are choosing, every single day, to allocate $50,000 to an asset that earns 3% before tax while inflation eats away at its real value.

Regret aversion tricks you into thinking that inaction is the safe, neutral default. But there is no neutral default when it comes to your money. Cash sitting in a savings account is making a bet – a bet that the guaranteed slow erosion of purchasing power is preferable to the historically proven long-term growth of global equities. The question is not “Should I invest or do nothing?” The question is “Should I keep betting on cash or start betting on the global economy?”

And here is the deeper irony: the one outcome that regret aversion virtually guarantees – staying in cash for years – is one of the most regret-inducing outcomes there is. Talk to anyone in their 50s or 60s who kept their money in savings accounts for decades. They do not feel safe. They feel regret. The omission kind. And by the time it arrives, the compounding they missed can never be recovered. Read through every excuse not to invest, debunked and you will see this pattern repeated.

7. How to Overcome Regret Aversion and Start Investing

The good news is that regret aversion is beatable. Not by ignoring it or powering through it with willpower, but by designing systems and mental frameworks that disarm it. Here is what works.

a) Start Small to Shrink the Regret Window

If investing $50,000 feels terrifying because of the potential regret, do not invest $50,000. Invest $100. Then do it again next week. And the week after that.

Starting small works because it reduces the stakes below your regret threshold. You are not going to lie awake at night regretting a $100 purchase. And once you have done it a few times, your confidence builds. You increase to $200, then $500, then $1,000. Before you know it, you have invested tens of thousands and the regret aversion that once paralyzed you has quietly lost its grip.

This is not a half-measure. It is a legitimate strategy. The key is that you actually start. Today. Not next month.

b) Dollar-Cost Average to Eliminate the “Wrong Moment”

Dollar-cost averaging is perhaps the single most powerful weapon against regret aversion. Instead of investing a lump sum at one moment you might regret, you spread your investment across many purchases over time.

When you dollar-cost average into XEQT, there is no single “moment” to point to if the market drops. The concept of “investing at the wrong time” dissolves.

Lump-sum investing has historically outperformed dollar-cost averaging about two-thirds of the time. But if the choice is between dollar-cost averaging and not investing at all, dollar-cost averaging wins by a landslide. The best investment plan is the one you actually follow.

c) Automate to Make the Decision Once

Automate your XEQT purchases. Set up automatic contributions on Wealthsimple so money moves from your bank account into XEQT on a fixed schedule – biweekly, monthly, whatever works for your cash flow.

Automation converts a repeated decision into a single decision. You decide once, set it up once, and then it runs on autopilot. You do not have to look at the market and decide whether “now” is the right time. The money just moves. The shares just accumulate. Your regret-averse brain never gets the chance to intervene.

I set up my own automatic purchases years ago and it was the single best financial decision I have ever made. It turned a terrifying series of decisions into a boring, automatic process. And boring is exactly what great investing should be.

d) Reframe the Regret Equation

When regret aversion is whispering in your ear, it is asking you one question: “What if you invest and it goes wrong?” That question is designed to paralyze you. Counter it with a better question:

“Twenty years from now, what will I regret more – a temporary 20% paper loss that recovered within a couple of years, or having left $50,000 in a savings account for two decades while the market tripled?”

When you extend the time horizon, the regret equation flips completely. In the short term, action feels riskier than inaction. In the long term, inaction is almost always the bigger regret. Older investors overwhelmingly regret not investing sooner. Almost nobody looks back and says, “I wish I had kept more money in a savings account.”

The question is not whether you will experience regret. You will. The question is which kind you want to carry: the temporary sting of a market correction, or the permanent ache of knowing you left hundreds of thousands of dollars on the table.

e) Pre-Commit With a Written Plan

Before you invest a single dollar, write down why you are doing it:

• “I am investing in XEQT because it gives me diversified exposure to over 9,000 companies worldwide.”
• “My time horizon is 20+ years. Short-term drops are irrelevant to my goal.”
• “I accept that the market will drop 20-30% at some point. When it does, I will not sell.”
• “The alternative – keeping my money in cash – has historically been the worst long-term strategy.”

Keep this in your phone’s notes app. When the market drops and regret aversion screams that you made a terrible mistake, read your own words. They were written by the rational, calm version of you. Trust that person more than the panicking version.

f) Remember: Time in the Market Beats Timing the Market

This is the oldest investing cliché because it is the most reliably true. The cost of missing the market’s best days – which often occur shortly after its worst days – far exceeds the cost of being invested during its worst days.

If you are wondering whether right now is a good time to invest, the answer is almost certainly yes. I wrote an entire post on whether now is a bad time to invest, and the conclusion is always the same: the best time to invest was yesterday, the second-best time is today.

8. The XEQT Advantage: A Fund Designed to Minimize Regret

XEQT is, by design, the lowest-regret investment strategy you can reasonably build. Every feature of the fund works to eliminate common regret triggers.

One fund, one decision. You are not choosing between dozens of stocks or sectors. There is one fund. You buy it. One decision means one potential point of regret instead of dozens. And when that one decision is “own the entire global stock market,” it is remarkably hard to second-guess.

Global diversification removes country regret. If you go all-in on Canadian stocks and the U.S. outperforms, you feel regret. If you go all-in on U.S. stocks and international markets rally, same thing. XEQT owns it all – Canadian, U.S., international developed, and emerging markets. Whatever does well, you own some of it.

Automatic rebalancing removes timing regret. BlackRock rebalances XEQT’s underlying holdings automatically. You never have to decide when to shift money between regions. No decision means no opportunity for regret.

Low cost removes fee regret. With a management expense ratio (MER) of just 0.20%, you are never going to look back and feel like you overpaid. Compare that to the 1-2% MER on actively managed mutual funds.

Simplicity removes complexity regret. A portfolio of 12 individual ETFs means 12 things to monitor, 12 rebalancing decisions, 12 potential “I should have bought more of that one” moments. XEQT collapses all of that into a single holding. The simplicity is not a limitation – it is a feature designed to keep your regret-averse brain from sabotaging you.

9. What I Told My Sister

I showed my sister the comparison table from earlier in this post. The numbers were stark enough to get her attention. But what actually got her to act was when I asked: “Twenty years from now, which version of yourself will you be more upset with – the one who invested and rode out a couple of rough years, or the one who left fifty grand in a savings account because she was afraid of being wrong?”

She sat with that for a long time. And then she opened Wealthsimple and set up a $500 biweekly automatic purchase of XEQT. Not the full $53,000 all at once – that was too much for her regret-averse brain to handle. But $500 every two weeks, on autopilot, with a plan to increase it as she got comfortable.

That was three months ago. She has not checked the balance once. She told me the automatic purchases feel “invisible” – like they are not even happening. That is exactly the point. She bypassed her regret aversion by making the decision once, starting small, and automating everything.

If you are sitting on a pile of cash because you are afraid of making the wrong move, I want you to understand something: the fear is real, but the math is clear. The wrong move is not investing and seeing a temporary dip. The wrong move is not investing at all.

Regret aversion tells you the safest thing to do is nothing. The data tells you nothing is the most dangerous thing you can do.

Open the app. Start small. Automate it. And let time do the rest.

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