Keep your cool when the stock market is on fire

You know the drill: you open your investment app and see red numbers. Another drop. Your stomach turns and you wonder: should I act now? This reaction is quite normal - our brain is simply programmed to react to danger. But just as you shouldn't panic if the value of your home drops temporarily, it is important to keep a cool head when investing.

Why are stock markets actually falling?
This is largely due to US President Trump. His erratic behaviour creates uncertainty and investors do not like that. In addition, he has introduced import tariffs that may reduce companies' profits. Stock markets usually react violently to this kind of news, even if the effect is often temporary. It is like a thermometer reacting directly to the weather, while the climate is much more stable.

The Psychology Behind Stock Market Declines
It is fascinating how we react to stock market declines. In good times, we sometimes become overconfident (do you know FOMO - Fear Of Missing Out?), but as soon as the going gets tough, fear strikes. You see this pattern over and over again: anxiety becomes fear, fear becomes panic, and panic leads to hasty decisions. It is exactly why many investors buy when prices are high and sell when they are low - the exact opposite of what is prudent!

Return needs risk
Here's an important insight: if you aim for an average return of, say, 5% a year, then a certain amount of fluctuation is part of that. Your portfolio may go up 20% one year and down 15% the next. These fluctuations are not nice, but they are the price you pay for long-term returns. Free returns simply do not exist.

The check: three crucial questions
Before you panic, ask yourself these three questions:

1. Do you have an unexpected financial setback that you can't cover with your savings account? (For example, replacing a broken car, washing machine or central heating boiler)
2. Do you have a big unexpected expense planned? (Such as buying a boat, holiday or buying a new house)
3. Have you already reached your investment goal? Is the answer to all questions “no”? Then there is really no reason to worry!

The sale opportunity explained
Suppose you are walking down the high street and see your favourite pair of jeans at 20% off. Chances are you get excited! Indeed, you may have regretted missing a sale on occasion. But why do we react so differently when stocks go on “sale”? A stock market drop can actually be a wonderful entry moment. The strange thing is: the shopping streets are full during discounts, but in the stock market there are few buyers during a drop.

A practical example
Mark (35) saw his portfolio fall by 15%. His first reaction? "Get rid of those shares!" But after talking to his financial adviser, he realised that his retirement goal was still 30 years away. Instead, he decided to put in extra during the drop. "It felt counter-intuitive," he says, "but I understood that I could actually buy shares at a discount. It felt like a rollercoaster at times, but talking to my adviser helped me understand that I was well stuck, declines and rises were part of it and I eventually got off where I was supposed to be." Five years later, this turned out to be one of his best financial decisions.

The role of a financial adviser
Especially in times of uncertainty, a financial adviser can help you make rational decisions. He or she can help you to:

• Keep your investment goals sharp
• Put market emotions into perspective
• Determine whether extra deposits during a downturn are wise
• Adjust your portfolio if necessary

Conclusion
Stock market falls are part of investing like rain clouds are part of the Dutch weather. It's the price you pay for higher returns over the long term. The best strategy? Stay calm, focus on your long-term goals and see a drop as a potential opportunity. And remember: history shows that the stock market always recovers, even if no one knows exactly when.