It is not the good times that define a person, but the tough times and how one chooses to react.

The same can be said for the market and how we respond in the bad times. As I write this, we’ve seen the Nasdaq retreat about 14% year-to-date hitting correction territory, the S&P pullback is right around 9%, and the Dow Jones is down roughly 6%.

When I say, “the bad times,” I don’t mean doom. Rather, one is starting to feel pressure or that slight anxiety that awakens the little voice in one’s head that drives the protection mindset and tries to guide us toward foolish decisions.

To combat the little voice, I want to share with you three positive actions to implement before or in a time of struggle to respond with strength.

First: Stick to the plan.

If you don’t have a plan, get one.

The adage, “Those who fail to plan, plan to fail,” is accurate. Without a plan, when the times of trouble come, we don’t know what our key values and goals are and how we plan to achieve them, meaning we are more likely to make an emotional decision based on what seems right for the moment, rather than what we ultimately want out of life.

Financial plans should be grounded in realistic market movements as defined by both realized and theoretical possibilities based on historical patterns. We know a client portfolio and financial plan can withstand an array of possible pullbacks—such as these—because the plan has already been stress tested for it. This doesn’t mean we won’t temporarily be set back in our advancement toward our life goals, or we won’t see our portfolio returns drop temporarily. It simply means we can rest assured that when such setbacks come, they won’t be fatal to our plan.

Some good practices during tough markets include revisiting your plan and reflecting on the advancement you’ve already made and reverting to the fundamentals of the plan and time periods prior when you felt like something “wasn’t working,” but ultimately overcame. 

That may lead to having more confidence in the plan.

Second: Take advantage of discounts.

I have not met a person in my life who would rather pay full retail than purchase something at a discount. In these times, you need to reshape your thinking and lean into the down markets. Investing using dollar-cost averaging is a common theme with many investors we work with. The benefit of dollar-cost averaging is when you’re able to add money to your account regularly and the market happens to be experiencing volatility, you can take advantage of those swings by buying in some of the troughs.

You won’t hit them all perfect, but you’ll be able to lower the average cost of your positions by creating multiple purchases of the same holding over a longer period. This is what you can achieve when you send in money every month.

For those taking money out, having a monthly deposit to your checking account from your investment account essentially does the same thing, just in reverse. In that, by not making a call once a year on when to pull money out, you “dollar cost average” out and reduce your risk of needing excess funds during a weak market.

If you have excess cash on the sidelines and have been waiting for a time to put it to work, these can be great opportunities. We still have a strong market with record low unemployment, good corporate profits, and a Fed that ultimately will not want to put that progress at risk.

Third: Focus on good things.

When it comes to market threats, you, statistically, are your own biggest threat to the success of your portfolio. One emotionally charged trade can do irreparable harm to a portfolio, or at the least, set you back years.

Mindset is critical when you’re in a time of struggle. Personally, I find it best to say the things I’m thankful for.

It may be corny to some, but when I am focused on the things in my life I am happy and thankful for, the hard stuff becomes trivial. I can see with clear eyes and realize, “this too shall pass.” 

A temporary drop in my portfolio doesn’t mean my wife won’t love me anymore or that we lose the house. The things that are truly important in life are still there and your plan is still working. Step back, refocus on the positive, then tackle the negative if it needs tackling—preferably with a good partner.

To be clear, when I say, “You should do …” it’s because it is exactly what I say to myself with regularity. When we say you need a good partner, that reinforces good decisions.

I share this message based on what I do personally in hopes some portion of it will bring you peace in the event you ever need it.

Ben Klundt is a financial adviser at Ten Capital Wealth Advisors LLC, in Spokane. He can be reached at 509.325.2003 and at [email protected].