Following Friday’s selloff amid the resurgence of tariff threats on China, I asked ChatGPT a simple question: ” How to Stay Calm In The Stock Market?”

That simple question generated an engaging and humorous take on financial advice for navigating volatile markets. In this week’s post, I thought it would be helpful to review ChatGPT’s advice and discuss it in more detail.

However, before we get there, it is worth noting that as active managers, we have long advocated for investors to be longer-term focused but manage near-term risks and volatility. The reason for managing near-term risks by taking profits, rebalancing portfolios, and holding higher levels of cash at times is to survive market downturns without making critical, emotionally driven investment mistakes. As is always the case, the most significant problem investors face when investing their money tends to be their emotions. As we discussed in “Speculator Versus Investor:”

The speculator’s deadly enemies are: ignorance, greed, fear and hope. All the statute books in the world and all the rule books on all the Exchanges of the earth cannot eliminate these from the human animal….” – Jesse Livermore

Allowing emotions to rule your investment strategy is, and always has been, a recipe for disaster. All great investors follow a strict discipline, strategy, and risk management diet. Emotional mistakes show up in the returns of individuals’ portfolios over time. (Source: Dalbar)

What should be obvious is that as an investor, your job is to step away from your “emotions” and look objectively at the market around you. Is it currently dominated by “greed” or “fear?” Your long-term returns will depend greatly not only on how you answer that question, but also on managing the inherent risk.

With that stated, let’s see what ChatGPT can tell us about navigating volatile markets.
 

The Eternal Struggle – Staying Calm with the Market

“Let’s face it—investing is hard. The stock market is known for testing our nerves at the worst possible moments. One minute, everything is soaring, and the next, your portfolio looks like a bad game of limbo. It’s easy to panic when headlines scream “MARKETS IN TURMOIL!” or when your favorite financial podcast proclaims doom is imminent. The truth is, there’s always a reason not to invest—rising interest rates, geopolitical tensions, valuations that look lofty, or warnings from billionaires like Ray Dalio about impending crises.” – ChatGPT

ChatGPT is correct. The Friday market sell-off was a wake-up call for overly complacent investors. However, as is always the case, corrections, while painful, are also opportunities. As we discussed in “Buying Stocks Is Always Hard.”

“Buying stocks is always hard. Particularly during corrections. Or, near market peaks. Or, when stocks are falling. And when they are rising. Oh, buying stocks is also tricky when valuations are high. And when they are low. You get the point. There is never the right time when it comes to buying stocks. I recently read Ted Seides’s excellent post, “The Hardest Day To Invest Is Always Today.” As Ted notes, there is always a reason NOT to invest in the financial markets.

When buying stocks during a decline, “loss avoidance” forces us to rationalize why we shouldn’t. Notably, the reasoning is always sound and logical. Such is particularly true if you consistently follow an “echo chamber of negativity” on the many podcasts, blogs, and mainstream media that use fear to generate views and clicks.

The reality is that despite there always being a reason NOT to invest, the markets tend to weather expected storms far better than expected. What is crucial to remember is that fear sells news and garners clicks and views; however, reacting emotionally is rarely profitable. As Legendary investor Peter Lynch famously said, “Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”

“Instead of obsessing over every market dip or gloomy prediction, take a deep breath and remind yourself: volatility is part of the game. The best way to stay calm is to zoom out. Look at market performance over the years rather than days. Over the long term, stocks tend to rise, fueled by economic growth, innovation, and human progress. So next time your favorite media outlet warns of a market “meltdown,” remember they said the same thing last time—and the time before.” – ChatGPT

Tricks for Taming the Market Madness

When market volatility strikes, this is the moment that you should do… nothing. As we discussed last year with the “Yen Carry Trade Blowup:”

“As an investor, the most crucial action to take during an ‘unexpected, exogenous event ‘ is to DO NOTHING. That’s right, don’t do anything. When something occurs, like a sharp market correction, our initial emotional response is to take action and begin liquidating positions. Such would certainly seem to be a logical reaction; however, more often than not, the time to sell positions was ahead of the event. Over the last two months, we have repeatedly warned that a 5-10% market correction was likely heading into the election.”

Such is also what ChatGPT suggested.

“When markets get choppy, our instinct is often to react. But most of the time, doing less is actually better. Here are some strategies to keep calm and carry on:“

• Distract Yourself: Instead of doomscrolling through financial headlines, reorganize your kitchen pantry, alphabetize your bookshelf, or take your dog for a walk. Anything that keeps your hands off your phone works wonders.
• Remember the Market Has Mood Swings: Think of the market as a moody teenager. One minute it’s soaring, the next it’s sulking over a tweet or a Fed comment. Trying to reason with it is futile.
• Indulge in Comfort Food: Yes, your kale smoothie can wait. When the market plunges, treat yourself to pizza, ice cream, or whatever makes you feel better. Stress eating might not move the market, but it’ll make you feel more human.
• Avoid the Drama: Headlines are written for clicks, not your benefit. “BREAKING: Markets Plunge” might sound dire, but in the grand scheme, it’s just noise. Avoid it and focus on the bigger picture.

Crucially, investors must remember that markets have intra-year corrections EVERY YEAR. Yes, 5-10% corrections during any given year are entirely normal. While the 19.2% correction in 2025 was larger than the average, there was a 9% correction in 2024, 10% in 2023, and 27% in 2022. Yet, after all the headlines of recession, rate hikes, bear markets, and tariffs, the markets are substantially higher than they were four years ago.
 

That is because volatility feeds into our behavioral biases, making us “feel” like we “must do something.” However, the lesson that investors should learn from unexpected drawdowns, like last Friday, is that: “Bull markets hide investment mistakes. Bear markets expose them.”

“One of investors’ most significant mistakes is treating their portfolio like a day-trading game show. Checking stock prices every five minutes creates stress and encourages poor decisions. Instead, focus on the bigger picture. Market downturns are part of the cycle, not the end of the world.” – ChatGPT

Market perspective is essential.

As ChatGPT concluded:

“Sure, it’s tempting to react when the market dips, but acting out of fear usually results in selling low and regretting it later. Instead, consider your long-term goals: retirement, wealth-building, or financial independence. Remind yourself that a short-term dip doesn’t derail a decades-long plan. If you’re feeling particularly anxious, turn everything off. The financial news, the apps, the market trackers—shut them down. Spend a day outside, read a good book, or watch a movie where the biggest crisis is a lost dog. By stepping away, you’ll likely return with a clearer mind and a renewed focus on your investment goals.”

Lastly, learn to find perspective and even a little humor.
 

Find Humor and Perspective

I realize that losing money in the market is not humorous. Friday was certainly not fun. However, we all make investment mistakes from time to time. Rather than beating yourself up or taking it out on someone else, learn to find the humor in making a stupid mistake. We all do it. Learning to laugh about it helps you realize that we are all human.

“In the end, staying calm in the stock market is about keeping perspective—and maybe finding a little humor in the madness. Remember, no one can predict the future with certainty. Not the media, not the experts, not even the neighbor’s cat. Instead of obsessing over the latest market move, embrace the fact that volatility is normal. The best investors aren’t those who panic or chase returns—they’re the ones who stay calm, think long-term, and avoid emotional decisions.” – ChatGPT

In ” Spock And The Logic-Based Approach to Investing, “ we addressed the concept of being unemotional in great detail.

We rationalize, try to avoid losses, fail to take action when needed, or take action when we shouldn’t, all driven by our emotions. Yet being unemotional about your money is crucial to long-term investment outcomes.

As Howard Marks once stated:

“If I ask you what’s the risk in investing, you would answer the risk of losing money. But there actually are two risks in investing: One is to lose money, and the other is to miss an opportunity.

You can eliminate either one, but you can’t eliminate both at the same time. 

I’ve been in this business for over forty-five years now, so I’ve had a lot of experience.  In addition, I am not a very emotional person. In fact, almost all the great investors I know are unemotional. If you’re emotional then you’ll buy at the top when everybody is euphoric and prices are high. Also, you’ll sell at the bottom when everybody is depressed and prices are low. You’ll be like everybody else and you will always do the wrong thing at the extremes.

Therefore, unemotionalism is one of the most important criteria for being a successful investor. And if you can’t be unemotional you should not invest your own money, period. Most great investors practice something called contrarianism. It consists of doing the right thing at the extremes which is the contrary of what everybody else is doing. So unemtionalism is one of the basic requirements for contrarianism.”

If you didn’t read that quote carefully, I would reread it.

When the market dips, ask yourself: Is this a blip in the bigger picture? Is my investment strategy still sound? More often than not, the answer is yes. If so, breathe, laugh at the headlines, and trust the process.

Here’s the real secret: Staying invested is often the best strategy. As Peter Lynch warned, far more money has been lost by trying to time corrections than by riding them out. So turn off the noise, focus on the fundamentals, and maybe, just maybe, enjoy a slice of pizza while you wait for the market to rebound.

After all, the stock market might be unpredictable, but your calm (and maybe a good sense of humor) can be your secret weapon.

More By This Author:

First Brands: Canary In The Rehypothecation Coal Mine?
Market Crack Or Beginning Of Something Bigger
Corporate Profits: A Reading Without Rose-Tinted Glasses