5 Ways to Control Your Fear in Bad Markets

March 2nd at 12:00pm by Tom Lydon

ETFs and FearNo matter who you are, you’re likely feeling it. “It” is fear about the markets, your 401(k), your portfolio of stocks and exchange traded funds (ETFs). Can you do anything about it?

It’s frustrating to see the world’s leaders working furiously to right the listing ship that is the global economy, yet nothing seems to stick. Economic indicators, trade flows, credit availability and consumer confidence are still all wrong, says The New York Times. And sadly, the mattress really is no place for your money.

What is a frightened investor to do?

Jason Zweig at the Wall Street Journal has written extensively on the subject of fear. All the way back in 2007, he noted that when people become scared, they begin to panic. He and others have noted strategies that still apply today, even though we’re in unprecedented times:

  • Tune out the news. Stay on top of things, but don’t surround yourself with the stories of doom and gloom. Yes, it’s bad out there. But dwelling on it and biting your nails does you no good. You can’t control the markets, but at least you can control your response.
  • Keep a journal. Oh, it sounds cheesy. But get in touch with your emotions and use logic and reason. In times of panic, it’s easy to let our imaginations spiral out of control until we’re in a full-on frenzy. Write down your thoughts to get some handle on things.
  • Are you still in? Think about what you’d like to do, but not when you’re panicked. If you’re uncomfortable that you’ve got anything in your portfolio, think about selling one-third. If the market declines another 5%, sell another third. This keeps one foot in, just in case we’re at the bottom.
  • Know your strategy. We use a 200-day moving average strategy: when the markets are above the 200-day moving average, we’re in. When the markets are below, we’re out. Do you have a plan?
  • Think about your moves. This ties into having a strategy. In times of fear and panic, it can be easy to forget the plan and just go to whatever looks good in hopes of turning a profit. Next time you’re tempted to buy something, step back for a moment and think about why. Is it because you’re just scared? Or is it because you think it could be a valuable addition to your portfolio and all the signs for a trend are there?

It’s important to remember that this will one day be over, too. It may not feel like it now, but the market will rebound. While we wait on the sidelines for an encouraging sign, though, it’s important to keep our heads together.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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