In October 2018, the Dow Jones Industrial Average, a widely followed measure of stock-price performance of 30 of the largest U.S. companies, dropped 1,380 points in just two days. While that sounds scary, it was just a 5% move, taking the index back to mid-July 2018.
Still, you might have noticed that when your funds have been doing well, you feel pretty euphoric, but when they’re down, you feel a lot worse than the pleasure you felt when they were doing better. This is a psychological effect known as loss aversion, and it’s believed to be hard-wired in to our brains. The best way to respond to these emotional swings is to try to take emotion out of the equation altogether. Over long market cycles historically, markets have moved up, although, as always, they fall eventually. It’s that long historic sweep that you should focus on, not short-termmovements. You should also pay attention to the things you can control in investing and ignore what you cannot change. Here are a few tips to keep inmind:
