Don’t Panic.

Working in the Financial Services Industry allows me some insight to the behavior of financial advisers as well as individual investors, and I must say I’m continually surprised. The stock market as a whole has been absolutely slammed since the beginning of the year. People are panicking, the word recession keeps propping up, and even mentioning subprime is considered taboo.

In short, people are bleeding money in the streets, and they don’t like it.

As a long-term investor myself, this is but a blip on my radar. I know, I don’t like losing money either, and while my losses have been mercifully contained, I accept the fact that stocks do, in fact, go up as well as down, and I don’t get to stay in the black all the time. Unfortunately most investors don’t see it this way. As soon as things turn negative, the slightest inclination that their situation could head south, and they are gone. Time to bail out of this bear market, I’m told.

This is where being an individual investor like yourself can be advantageous. Not only can you comfortably and rationally look at your portfolio and trim in areas you see fit, but you can ride out the storm without anyone hassling you. When you manage money for others you don’t have that luxury. You need to perform now, right now, and if things are going badly, this is all your fault. Never mind that the S&P500 is down over 5% this year, it doesn’t matter, you need to make me money right now, stop the bleeding, I can’t take the pain.

Tough.

If you are going to succeed in the stock market you need to have a pretty high tolerance for the pain of losing money. This is especially true if you are invested in index funds, since they track the market as a whole. There have been bear markets before, and there will be again. For now, just sit tight, let everyone else implode from the pressure. Time is on your side.

-Xias