I’ve been with my wife for 17 years. And after all that time I finally figured out something really important when we’re fighting – never, never tell her to calm down when she’s mad. You see, this is very important because I am almost always the cause of her anger. Telling her to calm down after I made her mad is like shooting someone in the belly and telling them not to bleed. Read on because there’s a useful investing analogy somewhere in here….
The all world stock market is down 9.7% from its January peak and 7.5% from its September high. Outside of a handful of US tech stocks it’s been a fairly crummy year for the global stock market and after a record setting bull market you might be wondering if the end is near.¹ Worse, you might be reading some scary narratives that this is the beginning of the big one. Maybe it is. I don’t pretend to know. That’s why I advocate diversifying in low cost index funds and rebalancing portfolios to protect us from the procyclical risks in stocks.
But I have to be honest with you all about something. Every time I see a downturn in stocks I see an army of pundits, advisors and journalists telling people not to panic and to think about the long-term. This is mostly right, but I also think it’s not nearly good enough. After all, if you’re allocated too aggressively going into a bear market then there’s no amount of hand holding and long-term thinking 
that is going to make you feel comfortable with what’s going on in the short-term. And this is the crux of my gripe with this commentary – if you’re panicking in the first place then constantly being told not to panic is not good enough.
Being told not to panic while you’re panicking during a bear market is like getting on a rollercoaster that’s a lot scarier than you thought and then having your rollercoaster advisor tell you not to panic while you’re in the middle of having a heart attack during a downturn. This. Is. Not. Good. Enough.
The time to prepare for a bear market is during the bull market. After all, everyone is a comfortable genius during a bull market and most people turn into panicked fools during bear markets. And yes, while it’s precisely right to tell people not to panic during the downturn of a rollercoaster it’s even more important to make sure you’re not getting on a rollercoaster you aren’t comfortable with.²
¹ – If you’re still reading end of world blogs after all this time then I don’t know what the hell you’re doing here.
² – This article should not be misconstrued as relationship advice.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.