What to Do When the Sky Is Falling

Unless you’ve been living under a rock lately, apparently the sky is falling (the sky being the stock market in this little analogy) and it’s falling fast. Before you go out and make sure you’re properly prepared allow me to let you in on a little secret…the market is doing exactly what it should be doing – going up AND down.

After the tear the market was on in 2013, many pundits seem to believe that we’ve got to be in some sort of “correction” and that the time to get out of the market is now. If you’re dealing with the stress of the recent market downturn, here are some tips to take to heart before you give in to the “sky is falling” hype.

Don’t Buy the Media Hype

I’ll admit it, I enjoy watching CNBC from time to time. It’s the geek in me. But the fact remains that the talking heads are there to get one thing – ratings. Beyond that, they know absolutely nothing about your situation and how the current state of the stock market plays in to that.

If hearing the noise of the financial media has got you crazy and unable to sleep at night, my suggestion is quite simple…turn it off and don’t listen to them. I’ve seen way too many investors fall prey to the belief that what the media says is gospel truth, only to regret making those decisions later in their investing lives. While it may be easier said than done at times, block out the noise and you’ll be a much happier investor.

Keep Your Eye on the Prize

A major reason why many feel that the sky is falling during times of turbulence, is that they lack a long term view. Instead of looking at investing as something that takes decades they view it as a daily thing which impacts how they feel about their portfolio. I hate losing money like the next person, but the simple fact is that you will lose money by being in the market. Don’t just assume you will, but don’t be shocked when you lose money.

When the market feels like it’s going up and down like a roller coaster, this is the best time to take a look at your investment plan. Consider why you’re investing and what you’re investing in. Assuming that hasn’t recently changed, then the best choice is to take is your normal path. Investing in the stock market, especially with the goal of wealth creation, is a marathon that takes years to complete and not something that should be given up on because conditions are less than optimal.

Take Advantage

This is where I like to take the sky is falling belief and turn it on its head. My favorite Warren Buffet quote is a well known one which says, “Be fearful when others are greedy and greedy when others are fearful.” Spoken plainly, view these more tumultuous times as an opportunity to get into some great investments at bargain prices. I have a small part of our portfolio in cash for this express purpose – to jump in when there is incredible value to be had.

I know that this mentality may require some savviness on some investors parts, but view these times as stocks being on sale. Now, this doesn’t mean that all stocks will necessarily provide solid value, but you can find them if you put in the work to locate them. The beauty of this is that if you’re able to purchase something of value, you have the potential to see some greater upside because of it that’ll help give a boost to your portfolio.

 

How do you tend to act when the sky is falling in the stock market? Are you like Chicken Little? Do you hunker down or look for value?

 

Photo courtesy of: Bailey Weaver

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About John S

John Schmoll is the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can enjoy the freedom that comes from living frugally.

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