After the Great Depression, an entire generation was scared off of investing. Market and exchange traded fund (ETF) volatility has led to fears that the current generation will experience a similar fear.

Some think that recent events within the financial markets may drive another generation away from the stock market forever. Factors such as falling real estate values, fraud on Wall Street and an unsure financial system have shaken the faith of individual investors, says Dan Jamieson for Investment News.

Over the past 18 months, stock prices have plunged to lows not seen by this generation, retirement savings have been wiped out, and many investors have pulled their money out of mutual funds to preserve what they have left of their savings.

Meanwhile, the Dow Jones Industrial Average fell more than 54% from an all-time high of 14,164.53 Oct. 9, 2007, to 6,547.05 March 9 of this year, its most recent record low. Likewise, the S&P 500 stock index plunged a staggering 57% to 676.53, from 1,565.15 during the same period. Money and the state of the economy have become the two greatest sources of stress for Americans.

Market fear is normal, but it can be conquered. Here are five tips:

  • 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?

Even if today’s investors haven’t been scared away from the stock market for good, it will likely be years before they regain enough confidence to dip their toes back in, since cyclical bear markets can be deep and long, some experts are calling for up to 25 years for a full recovery.

One thing is certain in these shaky times: Many investors are re-thinking their investment strategy. Have a plan and stick to it – having a discipline will give you the confidence you need.

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.