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Behavior Gap – Planning for a Market Decline Before It Happens Behavior Gap

A Little Late

The recent market decline, and the media (over)reaction that followed, reminded me that we still have not learned a very simple lesson: the time to prepare for a “crisis” is long before you find yourself in one. It’s not a good idea to figure out how a parachute works after you jump out of the plane.

The stock market is doing what stock markets do. Yet we run around like it’s such a shock. We don’t know when it will happen, and often it’s hard to tell why, but the fact that the market went down shouldn’t have surprised anyone.

So if you were surprised, here’s what you need to ask yourself:

Why so shocked? Didn’t we just learn this lesson a few years ago?

To be clear: this is not a problem with the market. This is a problem with us. How in the world can you invest your hard-earned money without a plan for both the good and the bad days? Any plan needs to account for the reality that markets go down as well as up. Part of the planning process must include a discussion about risk and even include lifeboat drills to see how you will react before you hit the water.

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