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Common-sense investing tips we forget during market panics

Many people seem to invest rationally, until the going gets tough. Then we often throw our reasoning out the window while making a mad dash for the exits.

It shouldn’t be like that. Here are some common-sense reminders that are worth heeding during volatile stretches in the stock market like now, with coronavirus anxiety seemingly everywhere.

You’re not going to lose everything

During times of heightened market turbulence, how often have you heard someone voice the fear of “losing everything” or getting “wiped out?” Sure, that’s a possibility, albeit remote, with an individual stock if the company suddenly gets hit with massive lawsuits, spirals toward bankruptcy or faces other cataclysmic obstacles.

But it’s not going to happen with broadly diversified mutual funds or exchange-traded funds, which have increasingly become investment mainstays. To lose everything in an index fund pegged to the Standard & Poor’s 500 index, for example, each of those 500 companies would need to go belly up for you to lose everything. That just isn’t going to happen.

POLL:Americans more worried about finances than health amid coronavirus outbreak

A newspaper showing stock prices

Most likely, you will just give back some of your gains accumulated during the previous, long bull market. During the past 12 bear or declining markets dating to the Crash of 1929, investors lost 42% on average, according to J.P. Morgan Asset Management. Conversely, they gained 164% on average during bull markets, which also endure for more than twice as long on average.

Bear markets are a normal part of the long-term cycle, but bull markets are more powerful, tilting the odds heavily in the favor of long-term investors.  

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