How to Stay Calm When You Aren’t Sure About the Market

by Miranda Marquit · 7 comments

Most of us know that one of the most important things we can do to build wealth over the long term is to invest our money. However, the idea of investing, for many, is scary right now. Most of us remember the financial crisis of 2008, and how entire retirement accounts were wiped out. Many people consequently had to put off retirement because of the crash, and that’s if they are lucky to still have a job.

While stock market valuations are much higher now, some people are still concerned about what could be coming next. The economy hasn’t been recovering at a good pace, and the markets are still choppy. And, of course, there are big questions about Europe — and whether the situation there could trigger another global market crash. In these types of conditions, it’s hard to remain calm when it comes to your money.

Before you panic, though, it’s a good idea to step back. Often, the solution is not to unceremoniously dump your investments, especially stocks. It’s better to have a measured response to the issue. Here are a few things you can do to in order to help you remain calm when you aren’t sure about the market:

1. Consider Index Funds

One of the biggest fears that people have is that their stock picks will tank. If you are in this camp, it’s important for your to reconsider your strategy. One way to stave off concerns about what’s next is to invest in index funds. Yes, low cost index funds will drop when the rest of the market does. However, when the market recovers, these funds often do as well. You don’t have to panic, thinking that you will experience a permanent setback, when you use index funds. Take steps to consider index funds, and you are far more likely to have peace of mind. Over time, investors in these investments have been handsomely rewarded.

2. Take a Big Picture View

Remember that in the short term, markets seem really volatile. It’s hard to see a trend line. However, if you “zoom out” and look at performance over time, you will see that stocks tend to smooth out, and a trend line that slopes upward develops. Keep in mind the big picture. It’s hard, when things look dismal, to consider the big picture, but you need to try. Look to the future. As long as the fundamentals of your investments are solid, there isn’t much reason to sell. Before selling a stock, or any other investment, consider the fundamentals. If nothing has changed, except the market, there is a good chance that the investment will recover in time.

3. Ignore Sensationalist Reports

It’s hard to ignore the financial media when its members are always screaming about the next catastrophe. However, you do need to try and tune out the hysteria. It’s too easy to get caught up in the hype. This suggestion applies to those investments that are being talked up, as well as those that are being talked down. Be wary of sensational headlines about imminent doom, as well as unstoppable investments destined to take off. Turn off the financial media, and you’ll be less likely to panic.

Do you have some suggestions for avoiding panic with your investments?

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  • Jean says:

    Investment can be scary. The cloud of uncertainty hanging over Europe is definitely worrying to all of us. In these times, it is important to stay calm and make precautionary decisions as far as possible rather than impulsive ones.

    -Jean

  • The market drives me crazy with all of it’s ups and downs. I have a guy I trust handling my retirement account.

  • Do not believe every news that you hear or read. I ask around, especially my friends and former colleagues who are now working in financial companies and stocks trading.

  • Financial Advice for Young Professionals says:

    People’s retirement accounts did not get wiped out because of the stock market. They got wiped out b/c their asset allocation was way too risky for being that close to retirement.

    Invest in low cost index funds and change your AA appropriately as you get closer to retirement and you should be just fine

  • Shane says:

    Lucky enough for me I have friends that work at financial companies, if I have questions they are there to help.

  • I know that my time horizon is about 40 years so I enjoy when the market goes down. It is an opportunity for my dollar coat averaging method to pick up some cheap discounted shares of my mutual funds.

  • Steve says:

    Shut off the tv, never watch the market shows. They are selling their shows, and bad news sells. So guess what you will always hear about? The next bad thing coming! Even if it never will happen or is years away.

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