2 Things You Should Do Right Now If You're Panicked By This Market

The coronavirus-inspired bear market in equities that has knocked many investors back on there heels has been an unfortunate and swift reminder that prices don't always move in a nice, steady upward trajectory. There are corrections occasionally and bear markets infrequently, but they do occur from time to time and are a normal part of the market cycle. While investors haven't experienced a true bear market since the financial crisis, these types of events are simply part of the price for playing the game.

Over the past few weeks, many have gotten a crash course on what their true risk tolerance. Everybody is happy to be fully invested in equities when the VIX is around 12, GDP growth is around 2-3% and the unemployment rate is below 4%. Those times are the low hanging fruit for investors, but a black swan event, such as the coronavirus showing up with little notice, can test even the most experienced investors.

As the resident "money person" in my family, I've gotten no shortage of emails, texts and phone calls in recent weeks and, I've got to say, it's been a refresher course in behavioral finance. Loss aversion, herd mentality, and confirmation bias and the consequent actions taken as a result are the sorts of things that investors do that shoot themselves in the foot trying to reach their financial goals.

You won't be surprised to know that the only question I got was "should I get out now?". For some, it was a genuine question of what they should do. For others, their minds were already made up and they were simply looking for confirmation that they should do it. For all, it was a good reminder that times like these are an ideal opportunity to take a look in the mirror and see where you really stand on these in times of crisis.

If you're one of those folks that is watching 1,000+ point daily swings in the Dow and feeling sick to your stomach, I recommend that you do two things today to set yourself up for long-term financial success.

#1 Reassess Your Financial Goals

Ask yourself this: What are you saving up for and how long until you need to begin accessing the money?

For most people, the answer to the first question is retirement. The answer to the second question could be anywhere from now to 50 years from now. Given that the S&P 500 returned more than 250% during the 2010s (with dividends included) with only drop of 20% (which was quickly recovered), it was easy to keep virtually 100% of your portfolio in stocks regardless of where you were on the retirement planning cycle and not think twice about it.

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