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A State of Mind When The Market Drops

A State of Mind When The Market Drops

How do you typically respond when the stock market drops?  Are you concerned your investment values has dropped or do you see it as an opportunity to buy something at a lower price?  As part of investing your portfolio you need to understand how you feel when the market drops. This state of mind can affect the actions you take following any market drop.

How does your State of mind toward a market drop affect your actions?

If you become worried or concerned that now you have less money it can begin to cause fear and then even paralyze you from continuing to invest or add new money to your portfolio.  This mental response may cause several reactionary actions such as selling at the wrong time or hesitating to buy until the market recovers fully.

If you see a market drop as an opportunity to buy or get back in the market at a lower price then you may make more proactive changes, rather than reactive.  This mindset can lead you to be more content or peaceful about the investment performance you experience over time.

Look at these charts of the S&P 500 performance over time.  Can you see how your state of mind would have impacted your investment decisions had you bought during a drop or hesitated in the past 1-year or 5-year timeframe?  To further consider how you should react to market changes listen to Jim Cramer talk about market rallies and market downturns.