“When the stock market experiences significant weakness, as it [has recently], we get a lot of calls from readers asking, ‘What should I do now?’ Our answer is always the same: ‘Ignore the market and follow your long-term plan.’ It’s at this point that many readers discover they really don’t have an objective long-term plan to guide them...”

The above paragraph was pulled from an article of mine that appeared in early 1997, almost 20 years ago. In other words, we’ve been through volatility similar to current market activity before — many times in fact. Solomon, one of the earliest market commentators, summed it up this way: “What has been will be again, what has been done will be done again; there is nothing new under the sun” (Ecclesiastes 1:9). Or, as Yogi Berra famously put it, “It’s deja-vu all over again!”

I hope the recent volatility hasn’t been hard on you. If it has, you may lack the kind of specific investing plan that provides confidence and stability through difficult times when the markets are moving against you. Let me encourage you to learn from this experience, and set aside time now — before the month is out — to develop an investing strategy that’s tailor-made to your family’s situation and investing temperament. For help, check out the “Start Here” section of this website (if you’re an SMI Member).

On the other hand, perhaps you do have a plan but haven’t been following it. It’s not hard to wander off the path. What appear to be “easy money” opportunities are constantly coming our way via friends, family, co-workers, neighbors, magazines, television, and the Internet. Before you know it, you’re trading in your get-rich-slow, long-term investments so you can engage in exciting speculations and market-timing plays. Your decision-making becomes more emotional.

When that happens, you are — if I may say so — heading for disaster. The markets are brutal and unforgiving. If you keep it up, it’s only a matter of time before you suffer a major setback to your long-term goals. In anguish, you’ll be slapping your forehead and shouting, “What could I have been thinking?!” Consider this a wake-up call to get back on track. (Reviewing the articles I’ll list shortly will help you.)

Or, perhaps you’re among the relatively few who (1) have a plan in place, complete with guidelines and boundaries, and (2) also manage to follow it. Still, you have a hard time dealing with the volatile nature of stock-market investing. You’re feeling stressed. You may be thinking, “I’ll never be able to stick with my plan all the way to retirement if it’s going to be like this once or twice a year!”

One option is to adjust your plan to conform more with your risk-tolerance levels. You might cut back your stock allocation, or extend your diversification into new areas, so that stock-market setbacks aren’t as damaging to your overall portfolio. Our Dynamic Asset Allocation strategy is a more conservative approach that you might consider.

If you rule out reducing your stock allocation because you believe you need the higher-risk growth opportunities to meet your long-term goals, then develop new investing habits. Avoid listening to market news. Don’t participate in those friendly water-cooler discussions where everyone shares how clever they’ve been in their 401(k) plans. Stop checking your account balances frequently. (I typically check mine no more than once a quarter.) Such activities may seem entertaining, but they’re counter-productive; they tend to encourage reactionary decision-making rather than the kind of purposeful approach you need.

I’ve looked through our back issues and selected a few articles that deal primarily with the attitude needed to be a successful investor. I commend them to you for your reading:

Mastering the basic mechanics of investing is important, but mastering yourself is where the battle is won or lost. The good news is you have help if you submit to Christ’s lordship: among “the fruit of the Spirit is…self-control.”