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6 Tips to Stay Calm During a Market Downturn

6 Tips to Stay Calm During a Market Downturn

Scroll through any newsfeed, and you’ll encounter attention-grabbing headlines about a sluggish economy, rising interest rates, and threats of an impending recession. And while this news is unsettling, it’s essential to remain calm, cool, and collected so that you can not only weather the storm but come out on the other side thriving.

While we’ve yet to discover a crystal ball that will predict the occurrence of market volatility or how long it will last, experts can look to history to understand the cycles. We know that a bear market won’t last forever. We know that it will always be followed by a bull market (which will be longer-lasting and will erase the losses of a bear market). We know the market fluctuates and that it will trend upward again. And we know that downturns create a perfect opportunity to revisit your investment plan.

We also know living through these times of uncertainty is uncomfortable – especially for those nearing retirement – but it’s vital to remain calm and carry on. Here are six tips to quell your fears, even through the worst.

1. Keep calm and stay invested

Don’t let your emotions control you. If you have a sound investment strategy, there’s no reason to abandon it during a market downturn. The worst thing you can do now is panic-sell at a loss, hoping to buy back at the bottom. The thing is, we never really know when we’ve hit the actual bottom. “Bull traps,” or false signals, result from the highly unpredictable market we’re experiencing. Buying into them will significantly affect your future returns. And if you’re unable to recognize the warning signs, you should work with an expert who can. Instead, you should review your plan and stay the course. That might mean taking the opportunity to contribute more capital if you have it, rebalancing your portfolio, or even doing nothing for now.

2. Revisit your investment plan

Take advantage of this “idle” period and make sure your financial plans still align with your goals. It wouldn’t be unheard of if the events of the last few years have you reconsidering your retirement timeline. It can be jarring to move the goalposts, but it might make sense to delay retirement to withstand some of the market volatility. A diversified portfolio will weather a recession long enough to accomplish your long-term goals. Spreading your money across a range of asset classes, especially longer-term, high-quality investments (equities, bonds, and property), can limit the losses of a market downturn.

3. Stop trying to time the market

It’s easy to get caught up in monitoring the highs and lows of the market. However, it’s time, not timing, that matters most. Trying to get in or out of the market at a particular time can backfire, and it’s nearly impossible to do it successfully. Remember, markets move in cycles, so it’s best to avoid the urge to make impulsive moves. Remaining invested throughout turbulent times will prepare you for a better recovery after the downturn. If you have a sound investing strategy, there’s no reason to abandon it during a period of volatility.

4. Turn off the news

Nobody likes bad news, and recession or not, the media coverage regarding the status of our economy is unsettling. We’re all influenced by the media, whether we like it or not. Being persuaded by the doom-and-gloom headlines can cause erratic and emotional behavior. So, disrupt the cycle and turn down the news. Or better yet, avoid it entirely and get important financial updates from a trusted advisor.

5. Control what you can control

As discussed earlier, we cannot predict market volatility – and we certainly can’t control it – but we can understand that its disruptions are temporary and won’t result in permanent loss. You will reach your goals if you stick with a long-term investment plan and maintain a level head. There is no reason to abandon a well-diversified, sound investment strategy for short-term volatility. Knowing how to navigate the market cycles (and your emotions along with them) will give you the confidence to resist temptation and stay the course to meet your long-term goals.

6. Check-in with a financial advisor

And, if you haven’t already done so, find a financial advisor who can navigate the ups and downs of the market while helping you meet your financial objectives. An advisor can review your financial approach and help you create a diversified portfolio while managing your goals. They’ll also talk you out of risky temptations should they arise. And then, as the markets recover, an advisor will help you adjust your investment plan as your priorities and targets change.

At Uncommon Cents Investing, we help investors and their families navigate the fluctuations of the market while keeping them on track to meet each of their financial goals. We encourage you to contact us to learn more about our services.

More About the Author: Sheena Hanson

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