Beginner’s Guide to Market Volatility

3 things behavioral experts say you can do right now to keep calm about the market


The stock market had a blockbuster year in 2021, but it's been up and down since the start of the new year, raising concerns for many investors.

It's unclear when the ongoing turbulence will stabilize. And though experts agree that if you're investing for a long-term goal, there's plenty of time for the market to rebound, watching a steep decline in your investments may have you feeling on edge. 

"Money is often emotionally laden because it is so abstract," says Lisa Marie Bobby, a psychologist and the clinical director of Growing Self Counseling & Coaching. "It means different things for different people, and the roots often go deep." If you associate money with a fundamental sense of safety and security or it's connected to your self worth, watching it "slip away" due to drastic market swings can create feelings of panic, says Bobby.

Still, you don't have to accept panic as an inevitability. There are ways to turn down the volume and the stress. "Ironically, I'm not a calm person, but my investments are the only thing that I'm calm about," says Harold Pollack, behavioral economist and co-author of "The Index Card: Why Personal Finance Doesn't Have to Be Complicated." 

Here are three concrete things Pollack and other experts say you can do to stay calm. 

Use visual aids

One way to help put current events into perspective is to give yourself something helpful to look at.

Pollack suggests drawing or writing out your timeline for meeting financial goals, whether that's your children's college fund or saving for retirement. With your timeline in front of you, you can see that you may be looking forward to events that are years and even decades away.

Visualizing all that can help you understand how concerned you should be about what's happening in the market at the moment and put the current decline into perspective. Even after the activity of the last couple of weeks, after all, the S&P 500 is still up significantly over the past 10 years. 

Looking at the S&P 500's 10-year graph can help you understand how this past week's lows will affect your investments in the grand scheme of things, says Pollack.

"Understand that things like this will happen, and if you said, 'Was coronavirus predictable?' the answer is, 'No,'" says Pollack. "If you say, 'Was it predictable that there would be, at some point, some sort of random event that sent the market into a tailspin?' Yeah, those things happen, and you have to understand that that's all part of the game."

Write yourself a motivational letter 

When your investments are hanging in the balance, there will always be some level of nervousness about the stock market, but Pollack stresses that it can help to remind yourself that the market will likely change before you need the money to achieve your goals. 

Consider writing yourself a motivational letter that details all of your reasons for investing and highlights what your long-term goals are. When you're feeling uncertain about whether or not you're making the right decision, it can be helpful to remind yourself why you started investing in the first place, and how ups and downs are all part of the experience. 

"You have to think about where you are in your life cycle, and how your stuff is invested," says Pollack. "If you're 30 years old, and there are no immediate life events that are going to require serious amounts of money, your real concern is, 'What is the stock market gonna look like 30 years from now?'"

Why you shouldn't panic when markets are bumpy

Video by Stephen Parkhurst

Practice self-care in ways that are helpful to you 

During times of stress and uncertainty, it can be easy to lose sight of what's important. Whether it's calling your best friend, making time to exercise, or journaling, make sure that you carve out time to do the small things each day that bring you joy and help you come back to center. 

"This will, like other storms, pass," says Michael F. Kay, a certified financial planner and president of Financial Life Focus in Livingston, New Jersey. "Take a walk, read a book, meditate, listen to music, hug someone you love. ... Focus on what you can control and know that short-term reactions are just that: short term."

Ultimately, a situation like this offers you an opportunity to better understand your feelings about money and investments, and what you can do to help yourself handle anxiety. 

"Pay attention to your emotional state during downturns, and use it to get clarity about your level of risk tolerance," adds Bobby. "If ebbs and flows in the financial market are creating extreme anxiety for you, it may be a more sustainable long-term plan to do things with your money that feel less risky."

This content is provided for informational purposes only and is not intended to provide and should not be relied on for investment advice. Any forward-looking opinions may not develop as predicted and are subject to change based on future market and other conditions. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

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