How to weather this stock market storm – The Wall Street Journal

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

Talk to real people and you quickly realize this is a ridiculous caricature.

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

Take the aptly named Lyle Steelman, 43, trumpeter of the Cleveland Orchestra. He started investing in 2009, just after the end of the global financial crisis.

A few years ago he bought two wooden figurines of a bull and a bear for about $5 each. He deliberately uses them as props, to “invert everything” and “protect my wallet from me,” he says.

“I know when I see red [as stock prices fall], if I let my emotions take over, I will stop the process,” says Steelman. “So I put the bull next to my computer to remind myself that when things are bad in the short term, it’s an opportunity to make more money in the long term.”

Conversely, “when the market goes up, I get that jolt of excitement, and I know I might be tempted to throw more money at it,” he says. “So I put the bear there, to remind myself that future returns are likely to be lower.”

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

When stocks go up, she wonders, “If the market fell 20% tomorrow, what would I have liked to change?

Last November, near the peak of the bull market, she reduced her stock holdings by about 10%. Instead of chasing hot performances, she walked away from them.

For Ms. Bishop, this year’s decline does not look like a calamity; she thinks it’s an opportunity. With stocks falling, she is preparing to buy.

“I look for quality names that have been on sale,” she says.

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

This gives him what he calls “stoic” peace of mind no matter what the markets do. “I focus on what I can control,” he says.

Mr. Jacobs owns a handful of exchange-traded funds that mimic the investment exposure of a Vanguard Target Retirement Portfolio.

When assets rise or fall sharply, he rebalances, selling enough of what has risen and buying enough of what has fallen to restore his holdings to their pre-set proportions.

In mid-May, he sold some of his short-term inflation-protected bond fund and bought stocks and conventional bonds.

The process is so automatic that it “allows me to ignore everyday noise and only take action when necessary,” says Jacobs.

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

He passes off Warren Buffett as a day trader. Dr. Woods kept a stock, Paducah-based Computer Services Inc.,

for 42 years; he held apple Inc.

for a quarter of a century.

Dr. Woods added to his existing holdings and bought new ones, as prices fell.

“I got used to the market overreacting both up and down,” he says. “Trading doesn’t make sense to me. I’ve pretty much decided that I never really intend to sell any of these stocks.

In 2021, newly minted online traders achieved momentary fame and fortune as stocks like AMC Entertainment Holdings Inc.

and GameStop Corp.

racked up gigantic gains, then fell to the ground.

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

However, these thrill seekers were not typical individual investors. They were extreme outliers, flukes from a pandemic that sidelined them at home with stimulus checks to burn.

The people I spoke to may also be atypical. They are all subscribers to my newsletter, which seeks to have a long-term view of the markets.

The general public is more fickle, but not as fickle as Wall Street likes to think. Since March 31, investors have withdrawn more than $51 billion from 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 total equity fund assets.

In the grueling bear market of the 1970s, individuals dumped stocks year after year, in slow motion, as if fleeing a sinking fleet of ships.

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

Write to Jason Zweig at [email protected]