Stocks are notorious for being volatile, with sudden increases and decreases in value that often have no discernible reason. Fluctuations can occur that may drive investors into a frenzy and trigger a panic. These fluctuations are the natural consequence of uncertainty and the overvaluation of recent information. If we are worriers, we may equate uncertainty with a bad outcome. But uncertainty is a natural consequence of markets—even of most things in the world—and uncertainty can also lead to opportunities. For example, buying the dip.
I have counselled countless professional investors over many ups and downs in the market, and even professional investors can jump to conclusions. Some people think that a dip means the trend will continue to decline, that they will lose almost all their money, and that they will never recover. How can you keep your head when the market plunges?
- Get Off the Roller Coaster. Keep in mind that over the long-term, stocks have done quite well. Diversified portfolios regain their losses—but it takes time. There have been 25 bear markets since 1928, with an average length of 9.6 months compared to an average length of 2.6 years for bull markets. The take-home message is that things usually get a lot better over time. Let’s call this your Time Horizon.
- Consider a Different Reference Point. We know from the work of Nobel Prize Laureate Daniel Kahneman that we suffer our losses more than we enjoy our gains. This loss aversion leads us to overly focus on the downturn. Rather than consider your loss from the highest value of your portfolio, consider your gain from the lowest value in the past for your portfolio. For example, the DJIA was 9861 in 1990 and as of April 25, 2025 it was 40,113. This reframes your view from losses to gains.
- What Did You Enjoy Before You Had the Money You Lost? We can easily equate what we have with what we think we need. But was your life so miserable when your portfolio was worth 50% of what it is now? What did you enjoy doing? What were your relationships like, what did you do for recreation, how was your family doing, what made you happy?
- What Can You Still Do Even if Your Stocks Have Gone Down? If you can still do almost everything you did before your stocks went down, then what difference does the change make? What can you do today, this week, and this month?
- How Do People With Less Survive? We often think that what we have (or want) is essential, but my guess is that if you are reading this, you probably have more net worth than most people in the world. Consider net worth a preference, not a necessity. How do those with less money get by? Are they all suffering? I doubt it.
- Focus on a Life Portfolio, not a Financial Portfolio. Rather than look at your net financial wealth, look at all the sources of meaning and pleasure in your life. This can include anything that you do. For me, it’s time with my wife, friends, hiking, swimming, reading, enjoying films and music, exercising, working, and pursuing my values. Money is only one value. The more sources of meaning that you have, the less you will focus on the short-term decrease in your stocks.
- Make an Appointment with Your Worries. One problem with worry is that it hijacks your mind. You worry about money day and night. You think you will find the answer, get closure, and then you will be able to relax. You lose sleep. One technique that is quite useful is to make an appointment with your worries. Set aside a time during the day—let’s say 3:15 PM—where you will focus on your money worries. You think you won’t be able to do it, but I have found that most of my patients can delay their worries to a later time. Worry time frees you up to live your life. And when 3:15 comes around, you can ask if this is the productive worry that will lead to a solution or an unproductive worry that leads nowhere. Let go of unproductive worry and accept the uncertainty for now.
Keep in mind that money is only one part of a meaningful and fulfilling life, and that stocks go up and down. Keep your life grounded in the everyday, not the predictions that haunt you.