Bull markets happen. Bear markets happen. Just stick to your financial plan, and stay calm and disciplined. When the market sours or slumps, don’t believe the talk that this bear it is different. It is not.
History shows this is true. When markets decline, they do so rapidly and painfully. The subsequent recovery is slow and uneven. But it does inevitably happen. If you take the longer view, it’s clear that markets almost always grow past previous highs after a dip.
Here are 5 things to remember:
There are no investment strategies that give you the market’s ups while allowing you to altogether avoid the downs, save for luck. Fear and greed are irrational emotions that potentially lead to bankruptcy if they influence your investment decisions.
Of course, it is hard to stay patient and hold when Wall Street analysts, investment gurus, and financial TV pundits spout endless gloom and doom at the troughs and exuberant optimism at market peaks. Short-term thinking only guides you to do the wrong things at the wrong time.
This is why it helps to work with an advisor – someone to cool your head when irrational exuberance strikes and convince you to stick to your plan in the face of uncertainty. No matter what the markets are doing, assure yourself that this time is no different.
History is on your side. For the world keeps going on and on. A speed bump rises, we go over it, and the economy doesn’t end. But the next week, there is another speed bump, then another.
All you have to do is stay on plan.