If the market has felt like a theme park ride lately, you’re not alone. As an advisor, I strive to follow my own advice: strap in and remain calm. It isn’t always easy. One week, we’re climbing the steep lift hill of a bull market, watching portfolios reach new heights. Then, the track disappears. We hit a sudden drop, our stomachs do a backflip, and that familiar investor panic kicks in.
It’s an exhausting cycle, but here’s the secret: the most successful riders don’t jump off mid-loop. They keep their hands inside the car and wait for the ride to pull back into the station.
Understanding the Dips and Loops
To remain calm, it helps you to know what kind of ride you’re on. Market movement usually falls into two categories:
- The Quick Drop (Correction): Short-term dips of 10% to 20%. These intra-year dips are common, occurring roughly once a year to keep the market from getting overheated.
- The Steep Plunge (Bear Market): A drop of 20% or more. While these feel like a freefall, they happen every 6 to 7 years. They’re a regular part of the journey, not a sign that the track is broken.
The Stomach Drop Psychology
Why does going down feel so much worse than going up? It’s a phenomenon called Loss Aversion. Evolutionarily, our brains are wired to prioritize avoiding pain over seeking pleasure. The sting of losing $1,000 feels twice as intense as the joy of gaining $1,000.
When the market descends, your brain screams —to sell everything and stop the sensation of falling. But jumping mid-ride is the only way to guarantee you get hurt. Selling during a drop turns a temporary dip into a permanent loss, causing you to miss the momentum that carries you back up the next hill.
How to Ride it Out
Try these strategies to make the ride smoother:
- Stop Checking the Altitude: If daily fluctuations make you nauseous, stop looking. The market doesn’t care if you watch, but your stress levels certainly do.
- Buy the Dip: If you’re still contributing to your accounts, a falling market means your money is buying more shares at a “discounted” price.
- Rebalance: Ensure your seatbelt still fits. If your stock-to-bond ratio has shifted, a little maintenance now ensures you’re ready for the next turn.
The Finish Line
The market’s biggest gains often follow its biggest drops. If you aren’t on the ride for the scary parts, you won’t be there for the exhilarating climb. Take a breath, trust the harness you built when you started your plan and remember: the ride always comes back around.
Questions about the market? Connect with Cindy Alvarez at Savvy Advisors. Call 720- 679-4368 today to ensure your long-term plan is on track.
Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. All advisory services are offered through Savvy Advisors, Inc. (“Savvy Advisors”), an investment advisor registered with the Securities and Exchange Commission (“SEC”).
