…Every investor handles ups and downs differently. It’s not necessarily your actions that will see you through periods of market volatility and loss, though; it’s your reactions. The best way so ensure that you won’t overreact when these periods flare up is through intelligent portfolio construction and proper risk management….. the reason most investors fail is because they don’t have the psychological tools in place to make it through a bear market.

Why I’m an Optimist

• 130,000 people will graduate with a degree in engineering this year. You don’t think a few of them will do something amazing?
• American households have $66 trillion in net worth. You don’t think they’ll do something productive with it?
• 8 billion people survive on less than $2 a day. You don’t think they’ll jump at every opportunity to improve their lot?

…Being an optimist doesn’t mean I don’t think bad things will happen. They will…..I’m just confident that the long-term odds are in my favor. You see, we know there is a slight edge, winning years to losing years….that tiny edge is all we need to succeed ….. When the odds are even slightly in your favor, you will win over time, even if you lose often in between.

….In a swift drop like we’ve seen in the recent drawdown it’s easy for many investors start to confuse the stock market and the economy…..While losses in the stock market are never enjoyable they’re still the best chance most of us have to see large gains in the future. This is the paradox of investing that is so painful and counterintuitive for people to grasp. Lower prices mean higher yields and higher expected future returns when new cash is put to work.

Things That Matter During a Market Sell-Off

Your Sources of Financial Advice. The majority of the people taking victory laps for “calling” the market correction would have had you out of the market for the past 50-100% or so of gains (and they’ll never get you back in). Charlatans aren’t offering advice, they’re fear-mongering to draw attention to themselves. Do your best to ignore these attention-seekers and focus on utilizing sources of advice that seek to provide context and perspective.

Now is the time when you find out if expectations been set properly. You figure out if your advisor has constructed a comprehensive financial and investment plan to see you through some losses. This is when you realize if they’ve helped balance out your willingness, ability and need to take risk in your portfolio. The financial advice-giving business really comes down to trust. You have to be able to trust that the person helping you with your life savings is providing actual advice, behavioral counseling and managing your personal risk accordingly.

My general rule of thumb is to ignore anyone who offers up constant excuses or 100% certainty. Remember, no one really knows how things will turn out, but it will feel better to latch onto the narrative of someone who would have you believe that they have all the answers. Most of the time the best sources of financial advice — especially during market sell-offs — are not the ones who claim to have all the answers. It’s the ones who know how to ask the right questions.