How to weather 2022’s decline in the stock market

One thing you are probably not enjoying is seeing your account balances being reduced due to the stock and bond markets declining in value. Obviously, the headline topic and cause of this decline is the heightened level of current inflation. This is thrusting some people into panic-selling of their portfolios.

I've been in this business for more than 20 years and have seen a lot of market fluctuations and the investor behavior to follow. Although you cannot predict what the markets will do, you can usually get close to predicting the behavior of the average investor. When the markets go down, they sell in fear of "losing" more. History has shown us time in the market and not timing the market is critical to your long-term success. Is this the bottom of the downturn, or will this continue? You will likely get the entire spectrum of answers from an entire spectrum of "experts." I am confident with this answer: No one knows!

I get it: No one likes seeing the value of their hard-earned dollars go down in value. However, that’s the risk of investing in the markets, and you don't actually "lose" unless you sell your assets. What can/should you do?

First and most importantly, stick to your plan! If you don’t have one, get one. Also, don't let your emotions get the best of you. Corrections and even bear markets — markets down 20% from their all-time highs — are usually normal and sometimes necessary to bring company valuations to appropriate levels. Second, invest more. Whether it’s through your 401K contributions, your dry powder (cash or equivalents) in your brokerage account or extra money you have in the bank, investing while the markets are down could be very lucrative for obvious reasons. Lastly, don’t make any short-term decisions that could hurt your long-term goals.

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