5 Things to Tell Yourself When the Stock Market Takes a Hit

It's by nature that the stock market fluctuates.

The stock market is like a roller coaster. The ups and downs make some people feel sicker than others. As tempting as it may be to lose your cool when the stock market takes a hit and drags your portfolio down with it, it does you no good. What helps is looking to history to learn how the stock market has reacted in the past and to remind yourself of the following.

1. I have a long-term plan

Did you get into the market with a plan to cash out immediately or even in a few years? Probably not. Investing for the future is just that -- allowing your money to grow over the long term. Like any long-term relationship, you're sometimes going to be disappointed with the market, and on occasion, you're going to think it's the most brilliant thing ever.

If you're anxious about how much the market dropped last year, use this as a learning opportunity. Unless you're retired and need to make withdrawals from your investments to get by, you can afford to sit on your hands and wait. If you have years before retirement, use this time to save enough cash to carry you through a year or two if the market drops when you need the most funds.

2. History is on my side

Experience is a great teacher, and the longer you've invested in the stock market, the more familiar you are with the bears and bulls of it all.

The S&P 500 Index must drop by 20% or more to be considered a bear market. According to Hartford Funds, There were 26 bear markets between 1929 and 2021, each lasting an average of 289 days. Now, consider this: Between 1929 and 2021, there were 27 bull markets, lasting an average of 991 days each.

That's not to say that market hits don't hurt, but rather to illustrate that following each bear market has been a bull.

If a part of you believes this downturn is different, here's another interesting fact. According to Fidelity, the average 401(k) balance fell by 22.9% between 2021 and 2022. Yes, that feels awful, but when you consider that historically, stocks have lost an average of 36% in bear markets, it puts things in perspective. This drop is not unprecedented.

As mentioned, stocks lose an average of 36% in a bear market. However, stocks gain 114% on average during a bull market. And remember, bull markets last longer.

To sum it up, stocks are on the rise 78% of the time. That may be what makes the downturns seem so terrible.

3. I don't weigh myself 12 times a day

Obsessively checking your portfolio is about as constructive as weighing yourself every couple hours when you're on a diet. Just as it takes time to lose weight, it takes time for the stock market to work its way back up.

If you log into your brokerage account more often than usual these days, it's time to back away from the computer. You're doing yourself no favors.

4. I know better than to try and time the market

Plenty of people have convinced themselves that they know the right time to buy and sell. Many who panic and sell as the market falls believe they're doing the right thing.

However, when Merrill Lynch studied model portfolios, it found that over 30 years, portfolios based on trying to time the market routinely underperformed.

5. I understand that for some, it's all about selling ads

Those "experts" who spend most of their time warning that the sky is falling are accomplishing what they've set out to do: Capture as much attention as possible. The more viewers, listeners, and readers they can catch, the more money they can earn from advertisers.

Has the market dropped? Yes, but the sky is not falling. Buying into that hyperbole is one of the reasons investors get nervous and sell before the market has time to recover.

It pays to block out noisemakers.

Your internal monologue matters, especially during times of stress. The more you can counteract fear with evidence-based facts, the less likely you are to lose sight of your goals or to do anything you'll regret.