Don't panic, the markets always do this...

The markets. Can't live with them, can't live without them. We operate in so many markets on the daily often unconsciously. You're all in the housing market if you own or rent a place to live in or are seeking to. You're all also in the job market, either in hot demand because there is a shortage of you around the workforce in the industry you're working in right now, or maybe you're feeling in less in demand lately than ever before because perhaps there's a surplus of you in the market right now or maybe what you once could be highly valued for is being replaced by AI bots.

You're also in several other markets all at once too, such as gas, auto, clothing, tech, healthcare, travel, or [enter anything you're going to spend money on today, this week, this month].

You have seen the cost of goods go up and come down. Gas for example. Or airfare. The price never drops for long. Based on supply and demand and changing conditions impacting them both, prices always come back up. Not to stay up forever, but to be up until they drop again. That is true of the stock market too. Ups and downs are constant. But I don't think we're ever going to see a single scooped Thrifty ice cream cone ever just cost $0.15 again. You know? (Costco doesn't keep their hot dogs at $1.50 because that's what they cost, that's a marketing strategy to lose in the cost of that hot dog program every month to get you into the store). Prices generally rise and fall but overall, they do rise.

It helps me think of the stock market as a sort of two steps forward and one step back model on a continuous loop. Some may prefer to picture a bear and a bull in a tug of war game on a quarterly basis.

The bear has always been a symbol of the pessimistic investor view that value is dropping. If you know value is inevitably going to be dropping at some point is that pessimistic or pragmatic? The bull, the exciting optimistic side of things, loves the rides up this value roller coaster more so than the rides down that the bear enjoys.

If it all looks like too much for you, as this week the market dipped yet again, I get it. But I'm still urging you not to panic when the markets take a step back, or even two steps back. Embrace the bear with a hug and take the bull by the horns. Headlines don't help. I know. Headlines stoke the fire causing you to panic. Let me describe two things you can do to help you take the emotion out of all this bear or bull sh*t, because I think today's headlines might be feeling like all too much for you too right now.

A stock image of a bear looking contemplative.

How do you not panic when the stock market drops? Let me share two ways I know of:

1. You keep a long-term perspective. You hopefully don't need to live off your stock-like holdings anytime soon, and so as you read this you may even still be contributing to a long-term investment account for retirement or have years and years left to do so, where now that the prices are dipping a bit (i.e., S&P 500 index this week), you'll be able to buy even larger share volumes of these investments because the price is a bit lower. The more shares you hold at the end of your investment time horizon, the more wealth you tally up when the markets are back to flat or rising. Rinse and repeat through every one of these cycles (I kept at this formula in 2000 when headlines were about tech stocks crashing, in 2008 when headlines were about housing crashing, and during the 2020 pandemic when everything was uncertain and supply chains were busting). And every dip in between. You too can just stay the course through all these scary headlines that will keep coming... Then, later on, once and when your account value is way up and you are feeling yourself super close to the day or years when you'll need to live off that value, you start to slowly scrape some cream off the top and preserve it to live on. Not all of it, just what keeps you cozy at night. I feel if you were to scrape it all into what keeps you cozy at once (like into cash, CDs, cozy little bonds), that'd be too conservative, like being just in cash in a digital mattress, where then you'll start to lose the battle against inflation. Strike a balance and invest like your future depends on it while you have other income coming in, and only start to scrape cream off the top once you enter the phase of your life where your future income looks like it will depend on only the cream you can scrape off your investments.
   

2. You decide you can make money as investments go down too. You can 'short' the market by betting "it"/a stock/a fund will go down further. One of my accounts is with E*TRADE, now owned by Morgan Stanley. The E*TRADE platform has excellent webinars on demand that teach you about what's called "options trading" and what shorting means. It's a lesser-known way to make money on the stock market by us lay folks working for a living, and while I haven't done it yet, and they don't just let anyone do it without applying first for that investor level permission, from what I can tell it's not less effective or any less risky or any riskier. It's just quicker/shorter term transaction based. Betting the stock market will go up this week or not is about equally risky to betting it will go down this week or not. Because it does both day over day over day to some extent or another. If you're not with E*TRADE, I'm sure the same type of online learning platform exists with whatever broker you are with, or you can find more help on learning to short out on the web. Or like I mentioned in my last blog post, I liked the movie, "The Big Short," which does a fun job of educating you on what shorting investments means.

My main hope is that whatever the headlines are, they're not scaring you out of your long-term positions and into cash. Try to stay immune from knee-jerk reactions. I'm 52, and have inoculated myself many times over with big and small market upsets. I'm ready for a booster if another is issued this quarter. Pandemic puns, too soon?

What other tips do you have for not panicking about the markets, the headlines, or anything else that is out of your control and "unpredictable?" Yet... pretty predictable. I don't know why the old adage was so truncated. Seems to me, there are a few more things certain in life beyond "death and taxes," like let's add corporate reorgs, workforce reductions, market ups and downs, inflation, politics, weather, and scary headlines that keep us in a state of fear.

Am I right? How many risks of a government shutdown have you survived? How many worker shortages? Restructurings? Strikes? Bubbles bursting? Pandemics? Cyberattacks? Federal Reserve announcements? Geopolitical threats to our livelihoods?

You got this.

Do try to stay calm and carry on prudently. And share in the comments with other Club Friends here, what you do to ride out any panic or knee-jerking you might sense creeping up?

I learned once on the job, 'try to accept only what you can control or maybe influence, the rest is gravity.' And here on earth, most of us can't do anything about gravity.

So, I tell myself, "These headlines too shall pass." They always do. And more will come. You can do this. You got this! I'd worry about you say if you are in your no-longer-able-to-work years, or your 80s and only have S&P500 investments to your name and no other source of income you're living on, you may want to panic a little about your investments being too bullish no matter the timing. Not to say I know what the markets will do tomorrow. I don't either. No one does. But, if you're no longer able to work or are in your 80s, the time to have scraped some of the cream off the top of your wealth stack to provide you a steady source of income the rest of your days was probably already behind you, unless you're a mega millionaire on paper then I suppose you'll be right!

The rest of us, we can stay the course and understand when in life we may need to start to put some of our eggs into steadier baskets (I switched to eggs; cream can't be held by a basket, wink!). Hope this was helpful to you, Club Friends.

With my TLC, and because money matters,

el*

*not an expert, just care

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E.M.Powers ("el") is a regular person with no particular financial credentials or expertise who happens to be a money enthusiast and the founder of The Money Matters Club, a virtual watercooler for like-minded individuals with a thirst for building their own financial health. Since 2006, she's helped thousands of co-workers build their financial literacy and wealth by participating in The Money Matters Club, a community she built on her employer's internal network. Since 2023, she's been attempting to scale The Club's reach through its second home on the World Wide Web. Her opinions--as well as the opinions of all participants--are just that: opinions, which are subject to flawed logic, math, typos and correction. She keeps a growth mindset and is also always learning something new or bolstering her own understanding after discussions at The Club. All information shared is done so with the best intent to inspire and empower others to learn more about money considerations toward building their own financial muscles. Nothing shared is meant as individualized advice that anyone should act on without doing their own curious research and personal decision making. There are no dumb questions at The Money Matters Club. Your financial health and literacy are what this Club cares about. All investing involves risk. All results can and will vary.

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