It is easy to get swept up in fear, focusing on the short-term. When feeling this way, the only scenario you envision is one where stock prices are falling. The only thing that will make you feel better is if you do “something” about it now. “Sell something now!” I get it, we’ve all been there. If you find yourself falling down this mental rabbit hole, here are five thoughts for you:

1. Ask yourself if what you are afraid of will matter in five years. Did you know the US stock market is up 95% of the time over five year periods? Beyond that, our investment horizon isn’t next month or even five years, it’s the rest of your life. Remind yourself why we invest. We invest because over the long-term stocks are expected to beat bonds and cash. The short-term simply doesn’t matter.

2. Most of you own a diversified portfolio, which means your portfolio isn’t down 3%. In fact, bond prices are up sharply today and this year. If you are invested in a 50/50 stock/bond portfolio, your portfolio is down less than 1.5%.

3. Right now the market is where it was the last week of December 2019. It may be natural for us to anchor ourselves to the highest value our portfolio ever had, but that doesn’t make it logical. You were probably happy with where your portfolio was in late December 2019. If so, there’s no reason to be unhappy about it now. Your mind is simply playing tricks on you. It’s human nature.

4. Your portfolio is underweight international and emerging market stocks and overweight bonds. This means we titled portfolios to be more conservative before today, minimizing the losses even more. We can’t predict virus outbreaks or their future outcomes, but the shift was the result of our process. We’ve discussed this positioning in previous research summaries and will continue to follow our evidence-based process. If you want to do something, we would tell you we already did it for you.

5. You don’t need to sell stocks today to pay for dinner. We routinely hold cash needed for living expenses to avoid being forced to sell to meet cash needs. Even if stocks fall, you have plenty of bond assets available to fund your living expenses. In fact you probably have enough bonds to fund multiple years of your living expenses.

It is natural to be a little scared. It is human nature to want to do something about it. I hope these considerations help put your mind at ease.

Categories: Investments


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