Freaked Out by the Stock Market? Take a Deep Breath

The phrase “net worth” is wrongheaded, as if the only reasonable sum of our financial selves is assets minus liabilities. Next year may bring a big market bounce, or a pay raise, and your capacity for earning more ought to be part of the equation. Besides, net worth need not equal self worth.

Nevertheless, a positive and rising dollar figure is a fine thing. So take a look at the other pieces on the asset side of your equation. A decent chunk of it might be home equity. Did that fall a lot in the last few days? No? Good. Do you expect your bond mutual funds to fall as far as any money in stocks might? Again, probably not.

Remember, stocks are just a part of what you’re worth.

Stocks are for the long haul: There are several decades between graduation and retirement (or a couple of decades between the arrival of a new baby and college graduation).

If you’re on the cusp of retirement, keep in mind that the big idea here is to live at least 20 more years, which is usually plenty of time for stocks to bounce back from even an extended decline in the stock market. (And things can indeed look grim for a while, as they did between 2000 and 2010, when U.S. stock prices for the biggest companies more or less made no upward progress even if you were investing your dividends along the way.)

If college for your children is imminent or you’re building a down payment fund for a house purchase in the next year or two, you probably shouldn’t have much money in stocks. Do you have money in a target-date mutual fund as part of a 529 college savings plan? Check to see how much of it is invested in stocks — and whether that figure makes you comfortable.

If you’re in your 20s and just started investing in the past couple of years, I don’t envy you.

You may remember parents watching helplessly as half of their home equity and their retirement investments evaporated, at least on paper, after the 2008 financial crisis. If a parent also lost a job, and you took on perhaps more student loan debt than anyone in the family had hoped, it’s no wonder that you’d be reticent about investment risk.

A multiday decline, in your first few years of managing to put a bit of money away, can be harrowing. Putting long-term savings someplace safer is probably tempting, and perhaps it’s the only way for you to sleep better at night. But long-term returns in bonds will most likely be lower, so permanently moving money into them means you’ll need to save that much more to meet your goals.

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