5 Tips To Help You Remain Calm During A Market Correction

These tips will help you to avoid locking in losses during a market sell-off.

Since the start of this year, stocks have been in the red. Even for my portfolio, so far, it’s down approximately 20% today.

A negative 20% is a lot, but I’m not afraid. So far in this community, I’ve been advocating for investors to focus on the long-term, and that during this period of a market drawdown, you should aim to buy more stocks if you can, but hold if you can’t.

I will link some of my articles down below in case you haven’t read them:

• Are You A Good Long-Term Investor?

• Why You Should Stop Predicting Stock Market Crashes

• The Hardest Part In Investing In Order To Achieve Superior Returns

From my past articles, even though I keep asking investors of this community to hold on to their stocks even if they are in the red, I realized I haven’t addressed how to do it.

After all, when your portfolio is down double-digit, asking you to hold is easier said than done.

So in this article, I will be sharing 5 tips on how to remain calm so that you will be able to hold on to your stocks during a market sell-off (like what we are currently facing!):

Use A Boring Brokerage Account

I think this idea of using a boring brokerage account came from the famed investor, Charlie Munger.

So far, it has worked really well for me. Personally, I used Interactive Brokers and I must say, their user interface (UI) is not the best. I got used to it after some time, but the UI is definitely not as user-friendly compared to other brokers like Tiger Brokers or Robinhood.

In the past, before using Interactive Brokers, I actually used Tiger Brokers. It was so easy to navigate around the system, and there are so many cool features like being able to communicate with other users. It was so easy to use that I realized, looking back now, that I actually made a lot more trades compared to when I’m using Interactive Brokers currently.

Perhaps such brokers sort of gamified the process of buying and selling stocks, which makes investors more likely to want to buy and sell their stocks.

If you use a boring brokerage account like Interactive Brokers, you will probably be less likely to log in that often to check your portfolio and more importantly, less likely to make frequent trades.

Not checking your portfolio helps you to remain calm in times of a market sell-off. You can’t be worried about a drop if you don’t know how much you’ve dropped! Jokes aside, don’t check your portfolio often, because it helps with keeping your emotions in check.

Avoid Having A Portfolio Tracker On Your Phone

If I ask you to use a boring brokerage account so you will track your portfolio less frequently, some of you may then argue that you have your phone to track your portfolio instead.

So I’m putting this out here right now. Don’t install a portfolio tracker on your phone as well.

Personally, I use Sharesight to track my portfolio, and even though they have an app for it, I don’t install it on my phone. Why?

If I don’t have it on my phone, I will be less inclined to check my portfolio! I use my phone every single day, more so than I use my computer, so it helps not to get distracted by such apps.

You will remain calm if you stop checking the daily price movement. So, don’t make it possible for you to track your portfolio every day using your phone, especially since you bring your phone everywhere you go.

Stop Watching All The Fearmongers on Youtube

People react to bad news more compared to good news. On Youtube, if you want views, you talk about the bad news. That’s what many finance youtube channels will talk about.

They are doing that to scare you, to earn money off you. Don’t get affected by such videos, because they make you panic for no reason.

Make a deliberate move to stop watching such videos. Ignore them, and move on. This will help you to keep your sanity in check, and you will remain calm even if the market is falling.

Once you stop watching such videos, you stop getting affected by all the macro news. This way, you can focus on what really matters: business fundamentals.

Be Diversified In Your Portfolio

As I mentioned at the start of this article, my portfolio currently stands at around negative 20%. That’s huge, right? But I’m fine with it.

I am down so much mainly because I hold a concentrated portfolio, so more volatility is expected.

If you can’t handle such volatility, then diversify your portfolio! In one of my old articles, I talked about how much you should diversify your portfolio:

And in that article, I specifically mentioned that more diversification does not equate to lower returns.

So, if you are always worrying about huge drops in your portfolio, diversify into more good companies. You will still do well, and with less volatility.

Diversification in your portfolio can help you to remain calm during a market sell-off, because your portfolio will be less impacted.

Have A Long-term Plan of Your Goals

First, do you have your emergency fund settled? People usually recommend your emergency fund to reflect around 6 months of your expenses, but really, it depends on you.

Second, do you like to hold a certain % of a cash position in your investment portfolio, or do you like to be fully invested at all times?

If you have a certain % of cash position, when do you intend to deploy them? When the market falls by 10%? 30%? Or 50%?

If you prefer to remain fully invested, like me, then you should already know if a market downturn comes, you can’t do anything, so ignore the market noises.

Long-term plans like those I’ve mentioned allow you to be ready whenever a market drawdown happens. You become emotionally prepared rather than surprised. Of course, being prepared in turn keeps you calm.

Closing Remarks

I have just shared with you 5 tips on how to remain calm during a market drawdown. I hope it benefits you.

Of course, different people have different methods of staying calm in times of market crises. If you have great tips to remain calm as well, do share them in the comment section and we can all learn from one another in this community.

Meanwhile, stay calm and hold on to your stocks! Invest safe!

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