Got the Stock Market Blues? Take These Four Steps

Benjamin Graham, author of The Intelligent Investor, said: “The investor’s chief problem – and even his worst enemy – is likely to be himself.” When the market goes down, investors let their emotions take control. Irrational behavior takes over and bad decisions can be the result.

Like having too much to drink after a bad day, jumping out of the market might feel good now, but you will pay for it later.

The following four steps help keep emotions in check and keep you focused on the things that matter most.

Ignore the Media
Media sensation creates confusion, turmoil and drama all to one end: to keep you watching. The truth: no one knows what is going to happen in the short term and you want to know a secret? It doesn’t matter.

What matters is that you consistently save and over time earn a return that will allow you to achieve your goals. History tells us equities earn an average of 10% per year over time. To experience the long term results, you must stay invested during the years where your account value may be down 20% as well as the years where it is up 30%, Over time those highs and lows average out to a respectable 10% rate of return.

Do Not Log In Frequently to View Your Accounts
Investment performance should be measured on a consistent basis; from year to year and quarter to quarter; not from the highest point in the year to the lowest point. Viewing accounts frequently emphasizes short term results, which have little impact on the overall long term growth of your accounts.

Think Long Term
Who cares what your account value looks like right now, next month or even a few months down the road? What you should be concerned about is what your account value looks like years down the road when you need to use your money. Science says that in order to earn a higher return in the long run, you have to stay invested in the short term. Market corrections are normal and if you stay invested they will have no impact on the long term results you will experience.

Focus on the Facts
Studies of investor behavior consistently find that investors who move their money around earn returns significantly lower than investors who buy low cost index funds and hold them for the long term. Do not try to time the market; instead follow a disciplined plan that properly spreads your money out over different types of funds.