How to Weather This Stock Market Storm

Stay calm and move on.

For many individual investors, it’s more than just a meme or a message on a t-shirt. It becomes a way of life.

With US stocks down more than 14% and the aggregated bond market down nearly 9% so far in 2022, I asked non-professional investors this week how they’re coping with the crash.

Wall Street views individual investors as a bunch of naive, unrealistic optimists who chase hot performance in good times and flee stocks at the first sign of trouble.

Talk to real people and you quickly realize it’s a ridiculous caricature.

Instead, many Main Street investors are methodical and thoughtful. They have become hardened through their experience of the ups and downs of the market, just as steel is hardened by tempering through heating and cooling.

Consider a clever man named Lyle Steelman, 43, who plays the trumpet for the Cleveland Orchestra. He started investing in 2009, right after the global financial crisis ended.

A few years ago he bought two wooden figurines of a cow and a bear for about $5 each. He intentionally uses them as props, to “turn things around” and “protect my portfolio from me,” he says.

“I know it when I see red [as stock prices fall], if I let my emotions take over, I stop the process,” Mr. Steelman said. “So I put the bull next to my computer to remind me that when things go down in the short term, there is an opportunity to make more money in the long run.”

On the contrary, “when the market goes up, I get very excited and I know I might be tempted to throw more money at it,” he said. “So then I put the bear there, to remind me that future returns are likely to be lower.”

Joy Bishop, 73, lives near Sarasota, Fla., is the former owner of a small manufacturing company. She keeps a meticulous investment diary to record her thoughts.

As stocks go up, she asks herself, “If the market were to drop 20% tomorrow, I wish I’d changed?”

Last November, near the height of the bull market, she cut her holdings by about 10%. Instead of pursuing the hot performance, she steers clear of it.

To Ms. Bishop, this year’s drop doesn’t look like a disaster; She thought it was an opportunity. When the stock falls, she is preparing to buy.

“I was looking for some quality names that were already on sale,” she said.

Paul Jacobs, 63, who lives near Austin, Texas, is a former senior financial manager in the energy industry. His experience in the financial sector did not make him a trader; instead, he used a spreadsheet to put his portfolio on autopilot.

That gives him what he calls “stoic” peace of mind, no matter what the market does. “I focus on what I can control,” he says.

Mr. Jacobs owns several exchange-traded funds that mimic the investing capabilities of a Vanguard targeted retirement portfolio.

When assets rise or fall sharply, he rebalances, selling enough of what has gone up and buying enough of what has fallen to restore his holdings to a pre-determined rate.

In mid-May, he sold some of his short-term inflation-hedging bond funds and bought common stocks and bonds.

The process is so automated, says Mr. Jacobs, that “allows me to ignore the everyday noise and take action only when necessary.

Jim Woods, 68, an orthodontist in Paducah, Ky., prefers individual stocks to mutual funds or ETFs.

He makes Warren Buffett look like a day trader. Dr. Woods held a stock, Paducah-based Computer Services Inc.,

for 42 years; he holds Apple Inc.

for a quarter of a century.

Dr. Woods added to his existing stock and bought new shares when the price fell.

“I’m used to the market overreacting to the upside and down,” he said. “Trading doesn’t make sense to me. I decided so much that I never really intended to sell any of these stocks.”

In 2021, newly minted online traders have rapidly gained fame and fortune thanks to stocks like AMC Entertainment Holdings Inc.

and GameStop Corp.

Earn huge profits and then fall to earth.

Their often reckless behavior drew derision on Wall Street (even as the pros failed to keep up with the amateurs).

However, those looking for that itchy thrill are not typical individual investors. They are extreme outsiders, flukes of a pandemic that has kept them out of the house with stimulus checks to burn.

The people I spoke to may also be atypical. They all subscribe to my newsletter, looking for a long-term view of the market.

The public is generally more fickle – though not nearly as fickle as Wall Street likes to think. Since March 31, investors have taken more than $51 billion from stock mutual funds and ETFs, according to the Investment Company Institute. That sounds like a lot, but it’s less than a third of 1% of all assets in stock funds.

During the harsh bear market of the 1970s, individuals abandoned stocks year after year, in slow motion, as if they were fleeing a sinking fleet.

Could that happen again? It can. But it will take more than this year’s decline to shake the resolve of today’s investors.

More content by The Intelligent Investor

Write letter for Jason Zweig at smartinvestor@wsj.com

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Edmund DeMarche

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