While this is a common theme I have written about in 2022, it is worth repeating.  In investing, planning for the long-term is critical for investing success. During bear markets, where we see the stock market drop 20% or more, and precisely when you see your portfolio moving with the market, it is human nature to think you should be working harder or making changes to your plan to “do better.”

However, when investing is done right, the plan should have been created with these situations in mind so that you do not require making changes to your “long-term plan” in the midst of a volatile market. As soon as you start changing your long-term strategy based on market events and predictions, you switch from long-term to short-term planning. In other words, speculating.

I recently heard another financial advisor use the following analogy to help us understand our bias for action even when no action is the best action. In soccer, during penalty kicks, the data shows that the best action for a goalie to take is no action. They should stand in the middle of the net for their best chance of stopping the penalty kick. However, if you watch soccer, you will notice the goalkeepers always guess where the player will shoot and dive in that direction.  This is because of their bias towards action.  They do not want to appear as though they are not making an effort.

When investing, you probably feel the same urge to do something when you see your portfolio declining. However, with investing, the data clearly shows that no one, not even professionals, can consistently outguess the market. No one has a crystal ball (which is not to say people don’t get lucky sometimes).  The good news is that long-term stock market returns are incredibly consistent over time and part of capturing the long-term returns of the market involves being around for the ups and the downs.  With a portfolio allocation that accounts for your comfort level and solves for limiting the “risk” of you missing your goals. The best action for you to take during periods of stock market volatility is to ignore the noise. The noise of the media trying to sell advertising, the noise of your brother-in-law who only tells you about his “wins,” and the noise of anyone speculating about what will happen next in the stock market or economy.

You would do much better to only focus on controlling things within your control. For example, save more and spend less.

It is also important that you (or the professional you work with) have an investment philosophy to guide your decisions.  Our Investment Philosophy is:

  • We follow the science of investing
  • We believe in global diversification
  • We do not time markets
  • We do not speculate
  • We emphasize low cost & tax efficiency
  • We are disciplined & ignore the noise

Most importantly, we focus on what we can control!

Find more insights on this topic from Executive Chairman and Founder of Dimensional Fund Advisors, David Booth, by reading his article:


So What’s Your Plan for the Bear Market?


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