It’s nearly impossible to remove emotion from your financial plan.
However, you have to resist the instinct to panic if you want the best long-term investment outcomes.
It might sound grim just to accept periodic severe losses, but there’s a good reason for it: Downturns are temporary.
Recognize this fact ahead of time, and build your financial plan with this knowledge.
Open positions are like chips still on the table in a casino — you’re not really a winner until you cash out and leave the building.
Selling your stocks at a market bottom locks in your losses.
If you’re still 20 to 30 years away from retirement, your IRA or 401’s exact balance today isn’t exactly relevant.
On the other hand, you shouldn’t expose your investments to volatility if you need to liquidate them soon.
Growth stocks take a pounding during bear markets, so they’ll probably have much uglier returns relative to value stocks and the market in general.
When the market crashes, growth stocks will look more favorable, and it’s not a bad idea to modestly shift your portfolio to the most aggressive allocation that’s acceptable within your personal risk profile.