Following Friday’s selloff amid the resurgence of tariff threats on China, I asked ChatGPT a simple question: ” How to Stay Calm In The Stock Market?”
That simple question generated an engaging and humorous take on financial advice for navigating volatile markets. In this week’s post, I thought it would be helpful to review ChatGPT’s advice and discuss it in more detail.
However, before we get there, it is worth noting that as active managers, we have long advocated for investors to be longer-term focused but manage near-term risks and volatility. The reason for managing near-term risks by taking profits, rebalancing portfolios, and holding higher levels of cash at times is to survive market downturns without making critical, emotionally driven investment mistakes. As is always the case, the most significant problem investors face when investing their money tends to be their emotions. As we discussed in “Speculator Versus Investor:”
What should be obvious is that as an investor, your job is to step away from your “emotions” and look objectively at the market around you. Is it currently dominated by “greed” or “fear?” Your long-term returns will depend greatly not only on how you answer that question, but also on managing the inherent risk.
With that stated, let’s see what ChatGPT can tell us about navigating volatile markets.
The Eternal Struggle – Staying Calm with the Market
ChatGPT is correct. The Friday market sell-off was a wake-up call for overly complacent investors. However, as is always the case, corrections, while painful, are also opportunities. As we discussed in “Buying Stocks Is Always Hard.”
When buying stocks during a decline, “loss avoidance” forces us to rationalize why we shouldn’t. Notably, the reasoning is always sound and logical. Such is particularly true if you consistently follow an “echo chamber of negativity” on the many podcasts, blogs, and mainstream media that use fear to generate views and clicks.
The reality is that despite there always being a reason NOT to invest, the markets tend to weather expected storms far better than expected. What is crucial to remember is that fear sells news and garners clicks and views; however, reacting emotionally is rarely profitable. As Legendary investor Peter Lynch famously said, “Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”
Tricks for Taming the Market Madness
When market volatility strikes, this is the moment that you should do… nothing. As we discussed last year with the “Yen Carry Trade Blowup:”
Such is also what ChatGPT suggested.
- Distract Yourself: Instead of doomscrolling through financial headlines, reorganize your kitchen pantry, alphabetize your bookshelf, or take your dog for a walk. Anything that keeps your hands off your phone works wonders.
- Remember the Market Has Mood Swings: Think of the market as a moody teenager. One minute it’s soaring, the next it’s sulking over a tweet or a Fed comment. Trying to reason with it is futile.
- Indulge in Comfort Food: Yes, your kale smoothie can wait. When the market plunges, treat yourself to pizza, ice cream, or whatever makes you feel better. Stress eating might not move the market, but it’ll make you feel more human.
- Avoid the Drama: Headlines are written for clicks, not your benefit. “BREAKING: Markets Plunge” might sound dire, but in the grand scheme, it’s just noise. Avoid it and focus on the bigger picture.
Crucially, investors must remember that markets have intra-year corrections EVERY YEAR. Yes, 5-10% corrections during any given year are entirely normal. While the 19.2% correction in 2025 was larger than the average, there was a 9% correction in 2024, 10% in 2023, and 27% in 2022. Yet, after all the headlines of recession, rate hikes, bear markets, and tariffs, the markets are substantially higher than they were four years ago.
That is because volatility feeds into our behavioral biases, making us “feel” like we “must do something.” However, the lesson that investors should learn from unexpected drawdowns, like last Friday, is that: “Bull markets hide investment mistakes. Bear markets expose them.”
Market perspective is essential.
As ChatGPT concluded:
Lastly, learn to find perspective and even a little humor
Find Humor and Perspective
I realize that losing money in the market is not humorous. Friday was certainly not fun. However, we all make investment mistakes from time to time. Rather than beating yourself up or taking it out on someone else, learn to find the humor in making a stupid mistake. We all do it. Learning to laugh about it helps you realize that we are all human.
In ” Spock And The Logic-Based Approach to Investing, “ we addressed the concept of being unemotional in great detail.
We rationalize, try to avoid losses, fail to take action when needed, or take action when we shouldn’t, all driven by our emotions. Yet being unemotional about your money is crucial to long-term investment outcomes.
As Howard Marks once stated:
If you didn’t read that quote carefully, I would reread it.
When the market dips, ask yourself: Is this a blip in the bigger picture? Is my investment strategy still sound? More often than not, the answer is yes. If so, breathe, laugh at the headlines, and trust the process.
Here’s the real secret: Staying invested is often the best strategy. As Peter Lynch warned, far more money has been lost by trying to time corrections than by riding them out. So turn off the noise, focus on the fundamentals, and maybe, just maybe, enjoy a slice of pizza while you wait for the market to rebound.
After all, the stock market might be unpredictable, but your calm (and maybe a good sense of humor) can be your secret weapon.
Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube Customer Relationship Summary (Form CRS)
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