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History Lessons for Managing a Market Storm Part 1: Things You Can Do

Each Market Storm May Vary, but Abiding Lessons Remain Relevant to Help You Ride Them Out

If there’s a consolation prize for growing older, it’s that we get to learn an increasing number of history lessons first-hand.  When it comes to a pending financial market storm,  take a look at my past post on lessons from the 2008–2009 bear market:  “What Should I Do – or NOT Do – During the Next Bear Market?” One suggestion I made for when the next bear came along (now here), was to revisit the article and review the lessons history has to offer us … if only we will heed them. 

Good idea.  The circumstances precipitating each market storm may vary, but the abiding lessons remain relevant every time.  Continuing the theme, today’s post is part one of a two-part series revisiting 10 points on how to navigate down markets and economic crises.  

Since most of us prefer action to idleness, we’ll first cover the following five actions you can take to help during a market storm. In part 2, we’ll cover five things not to do in troubled financial times. 

#1:  Simplify

It’s hard to remain calm in turbulent times, when everything seems to be happening at once.  To help during a market storm, try embracing simplicity, in your life and your financial plans.  That’s not always so easy!  Here are two pieces to assist. 

Why Simplicity Beats Complexity

Simple Investing Isn’t Easy

#2:  Trust the evidence to avoid “the big market storm mistake”

Every investor yearns to buy low and sell high.  But many end up doing just the opposite in a market storm, assuming, “this time, it’s different.”  Here’s a post on using evidence-based history to avoid making this big (if common) mistake during a market crisis.

How Evidence Based Investing Saves Long-Term Wealth by Avoiding the Big Mistake

#3:  Control the controllable

When the world around us seems especially chaotic, it can feel as if we have no say over anything.  There are some greater forces we must leave to fate, but disciplined portfolio management needn’t be one of them, as described in this important January 2019 post. 

Simple Investing Strategies to Take Away from 2018: The Best Year-End Commentary Almost Never Published

#4:  Rebalance back to plan

Among the most important “controllables” is sticking to your personalized investment mix by rebalancing your portfolio back to plan during a market storm. Because this typically calls for selling excess bonds and buying low-priced stocks, rebalancing can feel scary and counterintuitive at the time. Here’s a piece on why it’s still a sensible thing to do. 

Rebalancing in Down Markets: Scary, But Important 

#5:  Maintain an adequate lifestyle reserve

So, this last one was much better completed in advance.  Still, it’s worth using the current crisis to see how you feel about past efforts:  Are your current lifestyle reserves enough for now?  If the answer is no, make a note to revisit this piece in the future … for next time there is a market storm so you are prepared. 

Using a Lifestyle Reserve to Ride Out Market Storms

Face a Market Storm by Embracing Disciplined Financial Planning

If you follow these tips on what to do when faced with a market storm and stay true to a disciplined financial plan, you can come out the other end when the sun peeks through the clouds.

You can also explore five things not to do during a market storm in History Lessons for Managing a Marketing Storm Part 2: Things Not to Do.