Podcast Episode 298: Different Ways People React to Down Markets

As we move a little further away from 2022, we start to get a little more information and data on what a very weird year it turned out to be. So many different factors played into the negative results we saw in the market, and we watched people handle that volatile year in a variety of different ways. Let’s take a look at some of the different emotions that manifested themselves over the course of the last year due to the down market.

One of the primary emotions that investors felt in a down market was fear and panic. Fear can cause investors to make poor decisions and react impulsively, such as selling off all their investments or making shady deals in order to survive the downturn. It’s important for investors to take a step back and assess their feelings before making any rash decisions during times of fear.

Another emotion that investors felt during a down market was anger. This emotion can be especially dangerous, as it can lead to revenge trading or other reckless moves to try and get back at the markets for their losses. These strategies are rarely successful in the long run, so it’s important for an investor to keep a level head when it comes to making decisions during a down market.

It’s also important to remember that fear and anger are natural reactions in times of uncertainty — what matters is how investors choose to channel those emotions. Fear can be used as an impetus for research, while anger can be used as motivation to make smart decisions in the future.

On the other side of the spectrum, we see other people approach this time with blissful ignorance.  These investors might not have been paying attention to the market during its downturn, or they may be completely comfortable with the plan they have in place and don’t worry about what’s happening week-to-week.

Then there’s another group that look at all of the red and see an opportunity.  These investors look for bargains and try to capitalize on any potential value that may emerge after such a market swing.

No matter what approach an investor takes, it’s important to keep in mind the key emotions of fear and anger while dealing with a down market — as well as how they can be used to make smart decisions when investing.

Here are a few of the things we discuss in this episode:

1:23 – The fear and panic people felt while the market was turbulent.

2:46 – Anger for a number of different reasons

4:13 – Is it possible to be blissfully ignorant during down markets?

5:28 – Some people view this time with an opportunistic perspective.

7:55 – On the case with Heath Grossman, CFP® – A tax-free Roth conversion

12:54 – Mailbag question about having too much money in the bank

14:51 – CEO’s Corner with Joel Johnson

21:53 – Mailbag question on Social Security and income limits.