Market Jitters: How to Keep Calm in a Down Market

By Martin Brown

Getting a bad case of market jitters during uncertain times is only natural. Be it your savings, IRA, or 401K plans, it’s no fun seeing your monthly funds statement whittle away.

Of course you wince every time you realize the market has swallowed up another 3, 4, 5 percent or more of your total portfolio. For single women, this can be a particularly nerve wracking time if you are relatively new to the world of investment. For the most part, few middle-income investors had strong financial role models growing up. And many women have grown up in households where their brothers received some wise words from their dads about sound ways to approach the market, but they were not generally included in that conversation.

Then there are the number of older women who, when finding themselves in the uncomfortable position of being widowed, see the value of the joint portfolio they had built with their late husbands suddenly wash away, like so much sand under their feet at the water’s edge. Equally uncomfortable is the young professional women who has a sense of growing unease as the financial markets continue to slip and the small savings she has accumulated shrink in size.

In reality, now is the dawn of a new age for women’s financial freedom. Today women account for over 50% of all earned household income. In the near future the majority of small businesses in America will be owned and operated by women.

But with financial freedom can come the strain of  recessionary business cycles in which most markets—and therefore investments—trend downward. It can be nail biting at times, regardless of your gender. Here are some words of comfort if you have found yourself recently coming down with a bad case of market jitters:

Don’t hang on every last bit of the 24-hour news chatter.

All news, all the time, has led to runaway competition for audience ratings. The prophets of doom consistently score higher ratings than news outlets that take a quieter more moderate position. For the year after 9/11, many newscasts had us convinced that there was a terrorist behind every lamppost. Not really, so we slowly came to realize.

The economic news of late has not been good. But if you look at the coverage of other financial setbacks—the Savings and Loan crises of the 1980s, the recession during the reign of Bush the First that swept Bill Clinton into office, and most recently the bursting of the tech bubble in 2000—all of these were reported with the same panicked tone that the “end of days is at hand.” In each and every downturn there are investors who take it on the chin. Just as in 2000 people who were heavily committed to tech stocks got clobbered, now individuals with portfolios over committed to such vehicles as real estate investment trusts are skating on thin ice. Yes, these market quakes do damage, but have not shown that they have the capability of causing an overall collapse of the financial markets.

Just about every investor is a white-knuckle flyer when it comes to seeing the value of her portfolio slip. You’re not the only one to hate clear air turbulence. Most passengers do. But when it’s over, what lingers is a fading unpleasant memory, not the life-ending disaster you once feared. The media is always going to flap their wings and their gums about the disaster coming tomorrow, right after these words from our sponsor. Don’t get too upset about it all. Some people just have to do questionable things in order to make a living, and a lot of those people we call “pundits.”

The real losers are the ones who never invest.

Of course there are horror stories about people losing their shirt, in everything from investing in a chain of dry cleaners to buying into a restaurant; or, as we saw in 2000, having put all their dollars into one particular dot bomb. In the big picture, however, history’s biggest losers are the ones who never invest at all.

In general they don’t get much media attention. I mean, what kind of story is it to say that a group of apartment renters never realized any property appreciation? Where’s the news value in reporting that a group of tenants lost their savings overtime; that their income dwindled down to the point that, when they were seniors, it was only their social security and Medicare coverage that kept them afloat? The average hard working Jane Paycheck who has never built up a savings account or invested just fades away into the endless fabric of our society.

The spectacular stories are about the people who have overextended themselves in, say, real estate and lost five million dollars. Stories like that could make any of us nervous. But the reality is that those who save regularly, and invest in a balanced and prudent manner, nearly always finish rich. Don’t fall for the horror stories. Prudent investors have come out on top since the days of the ancient Greeks. In the long run, chances are you’ll do just fine as a cautious investor—if you have a balanced portfolio.

Don’t panic, and take the ups and downs as they come.

Investment counselors will tell you endless stories that go something like this: “I had a customer who recently died at the age of 90, and no one knew that they were worth over “x” million dollars. When the market was up, they bought; and when the market was down, they bought more. They rarely if ever sold any of their holdings. Over time their value just kept going up.”

It’s no great secret how that happens. On October 19, 1987, known forever as Black Monday, the world held its breath as the stock market crashed taking with it nearly a quarter of it’s total value. At the closing bell on that dark day, the Dow Jones average closed at 1,739. An investor who that day decided not to panic but just to let her money ride was part of a market that, twenty years later in October 2007, topped 14,000 points!

The bottom line: investors who are in the game for the long run invariably come out well ahead.

Just remember, jitters are part of the process of investing. Don’t lose sight of the big picture, and history shows that you will be happy with the results.

Additional Reading

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