The recent sell-off in the stock market indicates that many investors are running for cover. And why not? After seeing markets tank in March in response to the COVID-19 pandemic and then hit new highs just a few months later, investors no longer have confidence that they can predict what will happen next. (Of course, no one ever knows, but that doesn't mean people don't try to guess.)

Are you feeling afraid regarding your investments? Are you wondering if you should take profits now or hold for the long term? And what if you're wrong? Surely, you don't want to lose money, but you also don't want to miss out on another market surge.

We asked three successful investors -- and Motley Fool contributors -- if they're scared of the current market, and if so, what they're planning to do about it. Hopefully, you can use their wisdom to stay calm and focus on your long-term investing strategy, which, after all, is how long-term wealth is ultimately created.

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An ever-resilient market minimizes anxiety

Rich Smith: After nearly a quarter-century of investing in the stock market, I've lived through Y2K, the dot-com bubble (and its burst), the financial crisis of 2007-2008, and now, the COVID-19 pandemic. Despite all these crises, I've watched the Dow Jones Industrial Average and the S&P 500 both rise fourfold in value, and the Nasdaq grow nearly eightfold.

So am I afraid of the stock market? No. I'm actually pretty amazed by its resiliency -- because four huge crises have only resulted in a stock market worth four times more than it was worth when I started investing.

Don't get me wrong. At a recent price of more than 29 times trailing earnings, the S&P 500 is trading at valuations only seen a handful of times in the past 150 years. Right now, I see a lot of stocks so overpriced, I wouldn't touch them with the proverbial 10-foot pole. I also see stocks selling for double-digit multiples to sales, when I'd prefer to be buying stocks trading for single-digit multiples to earnings

At the same time, however, I can't help but notice that all of the times when the market reached valuations similar to today occurred during my own investing lifetime. (The first time the S&P 500 ever got up past 29 times earnings was during the aforementioned dot-com bubble.) And what I've learned from those times of obvious OVERvaluation is as follows:

  1. Stock markets get overpriced. Eventually, overpriced markets sell off -- but there's no way to know when that will happen or how overpriced a market might get before it sells off.
  2. Even when the market, as a whole, is overpriced, you can still find the occasional bargain stock that's been overlooked. Buy those stocks, and you can remain invested and feel somewhat certain that when everything falls apart, your stocks at least won't fall as much as everybody else's.
  3. And finally, when the sell-off does arrive, you'll have an opportunity to shift your investments into even higher quality companies at very attractive prices.

In short, no, I'm not afraid of the stock market. But I am kind of getting impatient waiting for those better bargains to appear.

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Fear is your friend, as market opportunities abound

Keith Noonan: It's easy to survey the current stock market landscape and find causes for concern. Even after a recent bout of sell-offs, the S&P 500 index is up roughly 5% across 2020's trading. The tech-heavy Nasdaq index has gained roughly 25% across the same stretch -- all in a year that has seen an unprecedented economic downturn and continues to foreshadow more stressors ahead.

A combination of factors, including resilient performance for many technology companies and heavy stimulus measures from the U.S. Federal Reserve Bank and other central banks and governments around the globe, has helped stocks perform surprisingly well amid challenging conditions. Still, U.S. gross domestic product sank a record 32.9% annually last quarter, and there are signs suggesting near-term performance will continue to be rocky. Add in what's shaping up to be one of the most contentious election seasons in the country's history, and there's plenty of material for crafting a bear case. 

But I'm not afraid of the stock market or buying stocks. The name of the game right now is "uncertainty," and that's potentially a recipe for sell-offs. It's axiomatic that the market hates uncertainty, but long-term investors can often use fear to their advantage. As Warren Buffett once wrote, "Widespread fear is your friend as an investor because it serves up bargain purchases."

How am I coping with the market? My current strategy is to keep some cash on the sidelines while continuing to invest in promising small-cap companies that have already seen their valuations dinged by the coronavirus pandemic. Small-cap stocks have historically outperformed large caps on the rebound from recessions, and my expectation is that some companies in this category still present attractive value and are primed to benefit from powerful long-term tailwinds.

Watching the value of your portfolio sink is usually painful, but I'm still buying and will treat any potential market crash as an opportunity to build positions in companies with promising outlooks. Catalysts for a crash in the not-too-distant future are numerous, but my focus remains on long-term growth

Close-up of bear with open mouth.

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Retirement preparation trumps all fear

Barbara Eisner Bayer: I'm afraid of a lot of things: climate change, bears, and sinkholes. But the stock market? Not so much. And maybe I should be, because I'm closing in on retirement and therefore don't have that much time for a portfolio recovery if there's a devastating stock market crash.

What have I done that's keeping me calm? I've built a retirement portfolio that I believe can withstand any stock market pullback. Here are the steps I've taken over the course of my life to ensure I'll have plenty of money once I kiss the working world goodbye.

First, I diligently saved as much as I could during my working years and invested that money in stocks that have grown into significant assets right before my eyes. It wasn't easy, though. I tried to stay invested through both the tech bubble and the Great Recession, but on several occasions, fear got the best of me, and I unfortunately sold some positions, like Tesla and Microsoft, which have gone on to grow into magnificence. But luckily, I didn't sell everything during those panics, and those investments have grown and formed the basis of my retirement portfolio.

Second, since I'm eyeing retirement, I rebalanced my portfolio to a more conservative allocation -- along the lines of 40% fixed income investments, 50% stocks, and 10% cash. I've also added dividend payers, which will ensure that I have income coming in, even if markets pull back and my stocks take a hit.

And last, I've prepared a financial plan for retirement, which gives me the fortitude to stay strong during market pullbacks. First, I estimated my future expenses. Then, I ran through retirement scenarios with the help of a retirement calculator but also met with several financial advisors. (If you're at a large brokerage like Fidelity or Schwab, they have advisors in-house who will do this for free.)

I familiarized myself with the various Social Security strategies that were available to my husband and me, and chose the one that worked best for our life expectancies (long). As a result, I know how much income I'll need during retirement and where it's going to come from.

Because I've done my homework, I live with confidence, knowing that my retirement portfolio can survive a market downturn. Part of that was making sure I have enough cash on hand for three to five years of living expenses, so if the market does tank, I don't have to sell off assets in order to meet my monthly expenses.

I have no fear regarding a market correction. However, don't ask me what I'd do if I ran into a melting ice cap or fell into a sinkhole. While I may still be scared of bears, I'm not scared of bear markets.