8 Tips to Handle the Ups & Downs of the Stock Market Roller Coaster

Are you feeling a little nauseous from the big up and down swings in the stock market lately? Did you look at your investment or retirement account around Christmas time and have a mini panic attack? Don’t worry, you’re not alone.

STOCK MARKET ROLLER COASTER

ReisUP_Tips for Handling Ups & Downs of Stock Market

People compare the stock market to a roller coaster because it moves up and down in different amounts and changes direction quickly without warning. Some years, it’s like a tame little kiddie ride at your local fair - you know, the little single seater, creaky caterpillar with predictable rolling hills and valleys? It’s a nice, pleasant ride. Other years it’s like the brand spankin’ new thrill ride at Cedar Point or Six Flags that gives you the biggest adrenaline rush and nightmares for the rest of your life.

It’s especially hard for a lot of people to stomach that second version. The ups are super fun; the big downs… not so much. So here are seven, let’s call them safety tips, to help you handle the ups and downs of the stock market roller coaster.

#1 - Make sure you’re tall enough and healthy enough to ride this ride

Height, weight, and health restrictions are posted at the entrance to big roller coasters to keep you safe. Unfortunately, the stock market doesn’t come with such obvious warning signs, so it’s on you to assess whether or not you’re healthy enough financially to get on the stock market roller coaster.

For example:

Do you have an adequate emergency fund to cover life’s unexpected expenses?

If not, you should probably consider building that up before starting to invest.

Are you in credit card debt up to your eyeballs?

If so, paying that down should probably be your top priority.

If you’re not financially healthy enough to ride the stock market roller coaster, you probably won’t be able to stomach the ups and downs.

#2 - Pull your lap bar low and tight across your lap

Whether it’s a belt, bar, or shoulder harness, it has one purpose - to keep your ass safe and secure during that ride. Think of your investment plan as your lap bar - it’s designed to get you from the start of the ride to the end safely and successfully throughout all the ups and downs (and prevent you from falling to your death during a loop-the-loop). If you don’t have a plan - meaning a reason to invest, a goal, a timeline, and a strategy to follow - it’s like riding the stock market roller coaster without buckling yourself in.

If you don’t have an investing plan, it’s like riding the stock market roller coaster without buckling yourself in.

Sure, you might be okay if the ups and downs are mild and the coaster doesn’t go upside down. But that’s not how the market works! Chances are, there’s going to be a period of time or, probably, multiple periods that are so bumpy or inverted that you will almost certainly get thrown from the ride if you don’t have a belt or lap bar. Same goes if you don’t have an investing plan.

If you need a game plan for your investments, or want to understand investing better, consider enrolling in my course, WEALTH.

 
 

#3 - Keep your arms & legs inside the ride at all times

This is similar to the lap bar. You want to get off the ride with the same number of limbs as you got on with, right? Same with the stock market roller coaster - You want to get off the ride with the money you initially invested, and hopefully some extra cash in your pocket.

#4 - Keep your eyes forward and neck straight

Especially when the stock market is dropping, you need to keep your eyes on the prize. Look forward, toward your financial future, and keep a long-term view. Your goal is to get to the end of the ride successfully. Don’t focus as much on the number of turns and loops between now and then.

#5 - Wait until instructed to exit the ride

This is another way of saying “Do not panic sell or jump ship”. Most of the time, selling your investments when the market is going down is one of the worst things you can do. Depending on your situation, it may actually be better to invest more money when the market is falling. That’s the whole idea behind dollar-cost averaging (DCA) and investing money consistently on a regular basis.

In short, stick to the plan until your plan needs to change. Most individuals should not try to time the market. Leave that kind of risk-taking to the pros.

#6 - Never stand up while the ride is in motion

Don’t go looking for extra thrills and taking on more risk by standing up mid-way through the ride. A lot of investors get this euphoria and crazy look in their eyes when the market is going up, so they take on more risk than they can stomach by:

  • moving more money into their accounts

  • shifting their investment allocation to more stocks

  • buying the hot new thing (like bitcoin a year ago)

If you’re on the stock market roller coaster and following an investment plan and strategy that’s right for you, you’re probably already taking on enough risk for your situation. Don’t take on any more risk than you need to reach your goals.

#7 - Take breaks if necessary

Make sure you’re grounding and resetting yourself between rides on the stock market roller coaster. You can do this through regular monitoring of your plan and a process called rebalancing. Monitoring your plan involves reassessing your financial life and goals on a regular basis and tweaking your investment plan as necessary as things change.

For example, when you’re younger, maybe you can stomach the high adrenaline rides and crazy ups and downs of the stock market. But as you get older, you’re probably not as tolerant, and therefore may need to switch to some of the more low key “rides” aka bonds or income producing assets. Know which kinds of market rides you can tolerate at different points in your life.

Rebalancing, on the other hand, resets your portfolio mix, or allocation, back to the percentages you originally set in your plan. Rebalancing essentially puts your cart back on the tracks if it drifts off.

#8 - Don’t ride while under the influence

(of drugs, alcohol, heightened emotions, or peer pressure)

Hopefully this one’s self explanatory!

Tell me…

How do the ups and downs of the stock market make you feel?

Leave a comment below to let me know!

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Tara Falcone, CFA, CFP® | Facebook: ReisUP | Twitter: @reisupllc | Instagram: @reisupllc