The Great Market Coaster: How to Keep Your Cool in a Volatile Stock Market
If the market has felt like a theme park ride lately, you’re not alone. As an advisor, I strive to follow my own advice: strap in and remain calm. It isn’t always easy. One week we’re climbing the steep lift hill of a bull market, watching portfolios reach new heights. Then, the track disappears. We hit a sudden drop, our stomachs do a backflip, and that familiar investor panic kicks in.
It’s an exhausting cycle, but here’s the secret: the most successful riders don't jump off mid-loop. They keep their hands inside the car and wait for the ride to pull back into the station.
Understanding the Dips and Loops
To remain calm, it helps you to know what kind of ride you’re on. Market movement usually falls into two categories:
The Quick Drop (Correction): Short-term dips of 10% to 20%. These intra-year dips are common, occurring roughly once a year to keep the market from getting overheated.
The Steep Plunge (Bear Market): A drop of 20% or more. While these feel like a freefall, they happen every 6 to 7 years. They’re a regular part of the journey, not a sign that the track is broken.
The "Stomach Drop" Psychology
Why does going down feel so much worse than going up? It’s a phenomenon called Loss Aversion. Evolutionarily, our brains are wired to prioritize avoiding pain over seeking pleasure. The sting of losing $1,000 feels twice as intense as the joy of gaining $1,000.
When the market descends, your brain screams to jump—to sell everything and stop the sensation of falling. But jumping mid-ride is the only way to guarantee you get hurt. Selling during a drop turns a temporary dip into a permanent loss, causing you to miss the momentum that carries you back up the next hill.
How to Ride it Out
Try these strategies to make the ride smoother:
Stop Checking the Altitude: If daily fluctuations make you nauseous, stop looking. The market doesn't care if you watch, but your stress levels certainly do.
Buy the Dip: If you’re still contributing to your accounts, a falling market means your money is buying more shares at a discounted price.
Rebalance: Ensure your seatbelt still fits. If your stock-to-bond ratio has shifted, a little maintenance now ensures you’re ready for the next turn.
The Finish Line
The market’s biggest gains often follow its biggest drops. If you aren't on the ride for the scary parts, you won't be there for the exhilarating climb. Take a breath, trust the harness you built when you started your plan, and remember: the ride always comes back around.
Hello 👋🏼 I'm Cindy. I work with a diverse group of clients to help navigate complex financial decisions by offering personalized financial and tax planning strategies. I help with decision-making when it comes to the more simple tasks of how to fund home down payments, when to take Social Security, how to exercise stock options, when to sell a business, and how to financially navigate divorce. There are more complex tasks that require tax and estate planning strategies where private market investments come into play. I cultivate strong relationships with my clients by actively listening to their needs then applying recommendations through planning. Trust is vital, and I’m committed to collaborating closely to help bring confidence and help clients achieve their financial goals.
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