Seven Ways to Handle Market Stress

4. Put Things Into Perspective

When it comes to long-term performance, we tend to get caught up in the never-ending conflict between instant gratification and consistency. As a professional investment adviser, I never close out the day without knowing how I performed. However, I balance that with the objectives set out by my clientele: to achieve long-term growth , exceed returns for my targeted indices (stocks , bonds or a blend of both) and most of all, not lose any capital .

We will have many losing days, some "down" months and an occasional "off" year. What you need to do is keep focused on your long-term objectives while managing risk in the short term. Remember, had you bought the SPX on the day before the 1987 market crash, your cumulative return through the end of July 2007 without dividends would be 415%. That is even after giving up 20% on the first day after your investment.

5. Tune Out the Noise

When markets get volatile and investor stress levels rise, there is one thing that is certain: The media will parade out the doomsayers. This is Halloween time for the doom and gloom crowd. The noise coming out of financial television and radio is as deafening as the emergence of cicadas every 13 or 17 years. You need to learn to tune it out or turn it off. If you do not, you might be persuaded to take actions that would deviate from your normal investment philosophy and strategy. Remember that consistency is important in investing. Deviating from a disciplined plan because of media pressure could cause you to second guess yourself and result in disaster.

6. Seek Out the Counsel of Others

From 1950 through 2006, the S&P 500 average simple price return was 9.37%.

Also counting from 1950 to 2006, the S&P 500 has been down 15 of those years. During that time, we have had our share of selloffs, market corrections, mini-crashes, bubble bursts and a full-blown market crash.