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5 Tips to Weather a Downturn

We've all been through it. The sweaty palms and elevated heart rate, the urge to check every few minutes to see what is happening, the anxious thoughts: Am I about to lose everything? What should I do?

Market fluctuations, especially big drops, are understandably hard on the nerves. That anxiety makes us want to do something -- anything -- to regain control and feel powerful again. The problem? For inexperienced or skittish investors, that impulse often leads to selling, so the very thing we do to regain control ends up, paradoxically, decreasing it.

Don't be your own worst enemy. Instead, try these tips for coping with anxiety during a market downturn:

1. Stick with sources you trust. Anxiety sometimes drives us to seek out as much input as possible, under the assumption that more information is a good thing. But you're likely to find analysts all over the spectrum -- from doom and gloom ("We're headed for a crash so sell, sell, sell!") to sunny optimism ("This is a fabulous buying opportunity!"). If you listen to everyone, you may end up even more confused and panicked. Instead, stay loyal to the news sources you've found to be trustworthy and reliable in the past.

2. Remember that slow and steady wins the race. Recall the parable of the tortoise and the hare. The tortoise beat out his much faster, glitzier opponent by slowly but surely sticking to his goal of crossing the finish line, while the hare played things fast and loose, with an overabundance of confidence. Folks who are in the market for the long haul are likely to weather market downturns just fine, as long as they don't overreact to every small storm that passes by. While it's hard to sit still in the face of anxiety, sometimes nothing is the best thing you can do.

3. Become a history buff. If you look at historical data, the market treats long-term stock investors quite nicely. Relying on data from Ibbotson Associates, Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter, recently wrote that between 1926 and 2004, "For all the rolling 10-year periods (1926-1935, 1927-1936, and so on), stocks -- either large caps or small-caps -- beat bonds in 60 out of 69 periods." His conclusion? Any money you don't need for a decade or more is a strong candidate for the stock market.

4. Review your asset allocation. Hit hard by a market downturn? You may have too much of your money in one basket, so to speak. Take a look at your current portfolio and make sure you are adequately diversified. That way, when one of your holdings goes sour, it is less likely to significantly damage your overall financial health.

5. Reduce your stress. If the market's moves find you losing sleep, changing your eating patterns, or obsessively checking stock quotes, then you're going to need to make a concerted effort to reduce your stress level. Whether that's by hitting the gym, talking it out, or focusing on other interests, you need to find a healthy way to deal with the worry. Worry, after all, negatively affects our ability to make intelligent, informed, non-impulsive decisions. As former Congresswoman Pat Schroeder said, "You can't wring your hands and roll up your sleeves at the same time."

None of us can predict with any certainty what will happen with the market. What we can do is work to overcome our own fears and hunker down for the long haul.

This article is adapted from the Motley Fool Green Light "Money Answers" archive, which features more than 100 articles on personal finance topics ranging from taxes to credit to beginning investing, organized by subject and life stage. For access to this content -- plus the current newsletter, back issues, members-only discussion boards, and advisor blogs -- take a free 30-day trial today!

Fool contributor Elizabeth Brokamp is a licensed professional counselor with a special interest in Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter.

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