Five Reasons to Stay Calm When There’s Stock Market Drama

Pam Krueger August 25, 2015

Is the glass half full or half empty? While you decide, I’ll drink up all the water in the glass because that's what Warren Buffett would do.

Before you react to any big and sudden sell off in stocks, consider this:

  1. China’s slow growth is no surprise even if Wall Street's theatrics suggest otherwise. Those who pay attention have watched growth rates in China slowdown for years.
  2. It was only a matter of time. Normalization of the markets was expected and overdue because the stock market is supposed to care about risk, and declines must happen and are healthy in order to break the ‘no-risk’ return perception.
  3. Your financial advisor should tell you that the stock market is the only market where when everything goes on sale, everyone runs out of the store.
  4. Stock market shocks (and corrections) happen when you least expect them. That’s why they call them shocks.
  5. Stocks don’t go up or down in a straight line and sell-off’s of 10% happen in every type of market. It’s been four years since the last real correction.
The urge to ‘do something’  can be powerful. You have to vote with your money but the time to cast that vote and manage risk is beforehand, when things are calm, not after a dramatic downturn.

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