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3 Tips to Calm Your Stock Market Fears

It sure feels like we’ve been moving from one financial uncertainty to the next in these last several years – from the global pandemic to supply and demand imbalances causing us to actually pay MORE than asking price for cars and houses, to steep inflation and 11 interest rate hikes between March 2022 and September 2023 by the Federal Reserve, to gridlock in Washington, and international conflicts becoming reality. 

And it’s been a rocky road in the stock and bond markets reflecting these uncertainties.  An important part of my job as an investment professional is to help people stay invested in the markets over time.  We know this is a key to building wealth, since the US stock market has rewarded investors with an annualized return of about 10%, since 1926, according to Dimensional Fund Advisors.  But it’s a bumpy ride - that average return has been earned with yearly returns as high as 54% and as low as negative 43%.  There have been 71 years of positive returns and 26 years of negative returns.  (Source: Dimensional, The Bumpy Road to the Market’s Long Term Average)

Here are 3 ways to help you keep your seat belt buckled and your eyes on the long-term horizon.

  1. Manage Your Emotions. Intellectually, we all know we want to “buy low and sell high”, but our emotions send us in the opposite direction.  When the market is riding high and everyone’s excited, we all want to buy, buy, buy.  And when the market is low and fear abounds, we all want to sell, sell, sell, which is the total opposite of what we should be doing.  I get it, trust me, emotions are powerful – but we have to recognize that using emotion to make investing decisions is not a wealth-building tactic
  2. Look Beyond the Headlines. In these days of the 24-hour news cycle, no matter which channel you prefer to watch, their job is to get you to keep watching and listening to their programming.  How do they do that?  Back to emotions – they play on our fears and our anxieties, which clouds our objective thinking mind.  Or they promote the latest fad or sector as the next get-rich-quick idea which tempts you away from a long-term disciplined strategy.  When the headlines become unsettling, consider the source, and limit your exposure to the news cycle to a need-to-know basis.
  3. Focus on What You CAN Control.
    • First, if you don’t have one, create a plan that suits your needs and risk tolerance. You wouldn’t start a long car trip without a map, and the same goes for your investing strategy. 
    • Second, diversify your portfolio – that means spreading your assets across multiple investment classes like large, mid, and small cap funds, growth and value funds, US versus international, stock funds versus bond funds. No one has a crystal ball as to which asset class will be the next winner, so put your eggs in many baskets and you’ll win over time.
    • Third, stay disciplined through the inevitable market dips and swings. This means keeping your eyes on the horizon and reminding yourself that the road to the 10% average historical return is bumpy and long.  But you’re strong, and you refuse to cave to emotional decision making.

"Someone's sitting in the shade today because someone planted a tree a long time ago" --Warren Buffet, on patient investing

Wishing you wealth and success,


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