By Josh Katzowitz, WCI Content Director

The last sustained bear market that became a recession came roaring into our lives in 2007-09 when the real estate bubble burst and the fallout nearly turned into another Great Depression. If you’re under the age of 35, you might not have been in the market at that point. You don’t know what a long-lasting bear market feels like.

If you’re under the age of 65, you might not have ever experienced sustained high inflation as an investor. So the fact that the current inflation rate of 8.6% and the fact that it’s been rising non-stop for the past 16 months has to be worrisome to anybody born after 1967. You’ve probably never experienced anything like this before.

And the fact that both are happening at the same time, well, it seems like we’re all experiencing something new.

But whether we’re entering unprecedented financial turmoil or if all of this will be resolved by next week, the advice remains the same. Don’t get out of the market now. Don’t move your equities to cash. Don’t sell low after buying high. Stay strong; stay the course.

That’s what Jim Dahle wrote in this post that was originally published in 2011 but has been updated a number of times since then:

“After going through a few bear markets, you realize you've seen this movie before and you know how it ends. All that matters is the price you buy at and the price you sell at 30+ years later. Everything in between is just noise. If you want to be a successful stock investor, you need to remember that and play the long game . . . I have had significant money invested for all of the last five significant drops. Each one is unique. Each time it hurts. But each time enduring them becomes easier. With exercise, financial muscles grow.”

That’s the same advice Justina Welch and Clint Thomas of Integrity Wealth are giving their clients.

“It is very easy to get tied up in what’s going on today,” Thomas told me last week. “You could say, ‘The sky is falling, a recession is coming.’ When you see these negative returns on your statement, you think, ‘Is this ever going to end?’ It is a mindset. But you do have to have some risk to get those higher returns [during bull markets]. It’s the price you pay to play the game, to get those returns instead of just putting it in a savings account. It is a mindset shift not to focus on the next three months but the next five years. If you don’t think [you can do that], you’re probably not suited to be an equity investor.

“If you’ve lived through some events and you come out the other side, you know it goes up and goes down, and problems get resolved and you move on. If you haven’t had the experience of a bear market, it’s like, ‘Oh my gosh, is this ever going to end?’”

Interestingly, I’m not finding much evidence online that people are panic-selling. Maybe I’m not looking in the right places, but from my frequent perusing of The White Coat Investor forum, The White Coat Investor Facebook group, and the Bogleheads forum, I’m not seeing much worry. People, at least from what I’ve seen, aren’t selling their equities and/or hiding their cash under the mattress. They seem to be staying strong and staying the course.

I’m not the only one who’s made this observation.

As Welch, one of The White Coat Investor’s recommended financial advisors, told me, Integrity’s clients “have very little panic. It’s because of our philosophy. Our plan around investing is to allocate your dollars for the long-term instead of things coming up in the next 12-36 months. We do a lot of planning around that to weather these ups and downs.”

As noted by The Daily Upside, although it feels like the market is cratering, the CBOE Volatility Index (VIX), aka as the “Wall Street Fear Gauge,” has remained relatively stable. As of this week, the index was hovering around 27, well below the mark of 40 that begins to signify investor pessimism (compare that to the 2008 Great Recession and the brief Coronabear in 2020 when the index rose above 80).

Even though the S&P 500 has lost about 20% YTD, right on the cusp of that bear market mark, the Wall Street Journal readers also seem relaxed.

But just in case you’re having difficulty staying the course and you’re seriously considering taking a timeout from the market, take a breath and think about trying these methods.

#1 Look the Other Way

Don’t look at your net worth or your retirement accounts or . . . well, just don’t log in to your accounts every day. Take a look once a month or once a quarter or even less if you can help it. Out of sight, out of mind.


#2 Think of This as a Good Opportunity

Some people are getting set to retire (and that brings its own set of questions and worries), but if you’re years (or decades) away from retirement, remember what Dr. William Bernstein said: “If you are in the accumulation phase of investing, you should get on your hands and knees and pray for a bear market so you can buy cheap stocks.” In other words, keep putting money in the stock market, because you’re essentially investing at a large discount.

stay strong stay the course


#3 Tax-Loss Harvest

If you have significant money in your brokerage accounts, you can tax-loss harvest on underperforming assets and get a nice discount on your tax return. Since you’re immediately exchanging one investment for one that’s similar, you’re not selling low because you’re still fully invested. But you still get to use the loss of what you sold for a nice tax reduction.


#4 Remember Your Long-Term Goals

If you have a written financial plan, just keep on following it. Hopefully, it accounts for what you should do in a bear market (and hopefully it says that you should NOT panic-sell). Remember what Jack Bogle said: “I've said ‘stay the course’ a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.”


When I searched through the WCI Facebook group archives to find evidence that people wanted to panic-sell, I came across one post from March 2020 that sums it up rather nicely:

“Don’t be a panicked selling idiot. Stay the course. The worst financial decisions imaginable are made at times like this. One hundred percent of all corrections, bear markets, recessions and depressions have recovered in the U.S. The average bear market drop is about 36%. That’s around 19,000 DOW (but don’t try to time the market). The average recovery time is just over a year. There are outliers, such as in Japan, but basing your decisions on improbable black swans isn’t very smart. Just wait it out knowing these things, kick your feet up, and watch the panic ensue without you.”


What I’m Reading This Week


A Cooling Market

Wall Street might or might not be coming for your house, but it seems as if the red-hot housing market is beginning to cool. As noted by Redfin, nearly 50% of home sellers in hot-spot cities like Denver, Salt Lake City, and Boise are having to drop their listing prices.

In part, it’s because interest rates, including those for mortgages, are rising, meaning less people can afford extravagantly priced homes. Rising inflation and a volatile stock market are also keeping people leery.

The housing market still favors sellers, but it also feels like the pendulum is beginning to swing the other way.

“There are two kinds of sellers in today’s market: Those who already know the market has cooled, and those who are learning about the cooling market as they go through the selling process,” Redfin Chief Economist Daryl Fairweather said. “The former wants to sell quickly before the market slows further and they’re willing to price slightly below comparable homes in their neighborhood right away, and the latter may have to drop their price if their home doesn’t attract buyers within a few weeks.”


A Noble Idea

If I ever win a Nobel Prize while writing for The White Coat Investor, I’m going to take that medal and immediately go the auction house. More than $100 million would probably help me in reaching financial independence. Oh, and like Dmitry Muraton, I would probably give some to good causes.


A Revamped WCI Page

Oh hey, WCI has been doing some remodeling lately. We just published our new Start Here page that will allow for easy navigation on a myriad of financial topics, whether you’re an investing novice or a seasoned WCI reader. That comes on the heels of our revamped About Us page that includes a photo of me on a horse! (You’ll have to click around a little bit to find it.)

In the last several months, we’ve also updated our Physician Mortgage page and our Physician Burnout Coaching page. Check out all of them, and be on the lookout for more redesigned pages coming in the future.


Money Song of the Week

I’m going to admit something that I never would have uttered out loud in the 1990s. I love glam/hair metal. Not all of it. Some of it, I think, is terrible, and some of the music of my favorite bands as a kid in the late 1980s has aged horribly (Poison and Winger come to mind immediately).

But some of those bands that were caught up in the glam metal craze from 1985 to, say, 1991 have been unfairly grouped as talent-less hair metal bands. Yeah, bands like Great White and Whitesnake wore sparkly leather pants and teased out their hair, but many of these groups were actually talented musicians.

Cinderella is one of those underrated bands. Yeah, they were some of the glammiest of the glam in 1986, but they were more blues-based than many of their contemporaries and, simply put, wrote better songs that still hold up today. I heard one vocal coach compare Cinderella to a band like AC/DC or Hysteria-era Def Leppard.

Anyway, I saw Tom Keifer, one of the original members and the lead singer/guitarist of the now-defunct band, and his new band last weekend. How 1980s hair metal-y was this show? L.A. Guns and Faster Pussycat were the opening acts.

Anyway, Keifer’s high-pitched, raspy voice still sounds good (despite the fact he had to relearn to sing after blowing out his voice and suffering partial vocal cord paralysis), and it was a fun show. Naturally, he played one of Cinderella’s biggest hits, 1986’s Somebody Save Me, which briefly warns about the dangers of buying that big doctor house. As Keifer sings:

“When I was a young boy/They said you're only gettin' older/But how was I to know then/That they'd be cryin' on my shoulder.

“Put your money in a big house/Get yourself a pretty wife/She'll collect your life insurance/When she connects you with a knife.”

So, that’s a little morbid. Either way, here’s Cinderella in all its mid-80s glory.


Tweet of the Week

One of the quotes left on the cutting room floor from my interview with Integrity Wealth was about how difficult it is to avoid looking at your portfolio because technology has made that knowledge only a click away. This tweet makes that point in only few words.

Have you found it difficult to stay the course in 2022? What strategies have you used to avoid panic-selling? Based on the market's performance in 2022, do you think I should have gone with Cinderella's “Don't Know What You Got (Till It's Gone)” for money song of the week? Comment below!

[Editor's Note: For comments, complaints, suggestions, or plaudits, email Josh Katzowitz at [email protected].]