Not freaking out when the market has a bad day

Not freaking out when the market has a bad day

[Queue Daniel Powter’s Bad Day]

Although I realize I’m probably in the minority here, but I check the market daily. This past week was incredibly brutal and painful to watch, to the point where I actually stopped checking it. For those of you that didn’t see the headlines, the U.S. and the rest of the world had an abysmal week, with massive losses all around. Wow. I watched my retirement fund year to date gain go from high single digits to a loss. It was super painful to watch my hard earned money just vanish. I blamed corporate greed, big hedge funds and even China for my losses. It was all over the news and the news brought in plenty of ‘experts’ predicting various levels of recession at hand.Screen Shot 2015-09-02 at 9.26.10 PM

For most of us, late 2007 is still pretty fresh in our minds, the great market crash here in the U.S. Stocks dropped 30% or so and people watched years of gains disappear. The more stocks fell, the more people were determined to pull money out. We either felt it ourselves, or watched our parents and grandparents hang their head in despair. Flash forward to today, where most of us are still pretty skittish when it comes to investing in stocks, and bad days like what we say last week often through us straight into panic and despair. Here’s what to do when the market has a bad day:

Don’t panic

I hear a good quote recently that compared the ups and downs of the market to the ups and downs of a roller coaster. The guy was saying that the only time you’ll get hurt on a roller coaster is when you try to get off while the ride is still going on, and the same goes for the stock market. Take a deep breathe and realize that the market is just one big cycle. It goes down, and it goes up. Realize that you’re saving for the long haul – 20-30 even 40 years and that these cycles will occur. It’s not the end of the world. When the market has a bad day, just turn off the stock ticker and focus on something else!Screen Shot 2015-09-02 at 9.28.05 PM

Don’t do much

Getting out in a down market might be a terrible move. Sure you might save yourself a couple bucks of loss, but it’ll cost you to get out and then get back in, not to mention that timing the market is also a pretty difficult thing to do. Nobody knows whether the market will go down or up tomorrow. Sure if you could sell now and jump back in at the bottom that’d be cool but nobody knows when the bottom is! The people that ultimately lose more money are the people the jump in and jump out; it’s a vicious cycle paying those fees.

Don’t forget about the future

For most of us, we’re all saving the bulk of our money for retirement, and this is likely the portfolio most affected by stock prices. It’s certainly pretty disheartening to look and see your year to date return be negative, meaning you’ve lost. Its times like this that you wish you’d just put it all under the old mattress. This kind of thinking forgets that we’re not saving for tomorrow, or next week or even next year. What we’re saving for is retirement, which is 30-50 years down the road. The market will come back, it always has in the past 100+ years, and I believe it will again. If you look at a graph of the Dow Jones, sure there have been some ups and downs, but overall it’s an upward trend. No one can predict the market and you’ve got plenty of time to earn that money back. Stay the course and stay focused on the end game, which is a very long time from now!0705141919a

The key takeaway is to a) not freak out and b) not to do anything incredibly stupid, like selling all your holdings. It’ll be alright, the market will come back and honestly if it doesn’t we’ll likely have bigger things to worry about!

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