Keep­ing your cool can be hard to do when the mar­ket goes on one of its peri­od­ic roller-coast­er rides. It’s use­ful to have strate­gies in place that pre­pare you both finan­cial­ly and psy­cho­log­i­cal­ly to han­dle mar­ket volatil­i­ty. Here are 11 ways to help keep your­self from mak­ing hasty deci­sions that could have a long-term impact on your abil­i­ty to achieve your finan­cial goals.


1. Have a game plan

Hav­ing pre­de­ter­mined guide­lines that rec­og­nize the poten­tial for tur­bu­lent times can help pre­vent emo­tion from dic­tat­ing your deci­sions. For exam­ple, you might take a core-and-satel­lite approach, com­bin­ing the use of buy-and-hold prin­ci­ples for the bulk of your port­fo­lio with tac­ti­cal invest­ing based on a short­er-term mar­ket out­look. You also can use diver­si­fi­ca­tion to try to off­set the risks of cer­tain hold­ings with those of oth­ers. Diver­si­fi­ca­tion may not ensure a prof­it or guar­an­tee against a loss, but it can help you under­stand and bal­ance your risk in advance. And if you’re an active investor, a trad­ing dis­ci­pline can help you stick to a long-term strat­e­gy. For exam­ple, you might deter­mine in advance that you will take prof­its when a secu­ri­ty or index ris­es by a cer­tain per­cent­age, and buy when it has fall­en by a set per­cent­age.


2. Know what you own and why you own it

When the mar­ket goes off the tracks, know­ing why you orig­i­nal­ly made a spe­cif­ic invest­ment can help you eval­u­ate whether your rea­sons still hold, regard­less of what the over­all mar­ket is doing. Under­stand­ing how a spe­cif­ic hold­ing fits in your port­fo­lio also can help you con­sid­er whether a low­er price might actu­al­ly rep­re­sent a buy­ing oppor­tu­ni­ty.

And if you don’t under­stand why a secu­ri­ty is in your port­fo­lio, find out. That knowl­edge can be par­tic­u­lar­ly impor­tant when the mar­ket goes south, espe­cial­ly if you’re con­sid­er­ing replac­ing your cur­rent hold­ing with anoth­er invest­ment.


3. Remember that everything’s relative

Most of the vari­ance in the returns of dif­fer­ent port­fo­lios can gen­er­al­ly be attrib­uted to their asset allo­ca­tions. If you’ve got a well-diver­si­fied port­fo­lio that includes mul­ti­ple asset class­es, it could be use­ful to com­pare its over­all per­for­mance to rel­e­vant bench­marks. If you find that your invest­ments are per­form­ing in line with those bench­marks, that real­iza­tion might help you feel bet­ter about your over­all strat­e­gy.

Even a diver­si­fied port­fo­lio is no guar­an­tee that you won’t suf­fer loss­es, of course. But diver­si­fi­ca­tion means that just because the S&P 500 might have dropped 10% or 20% does­n’t nec­es­sar­i­ly mean your over­all port­fo­lio is down by the same amount.


4. Tell yourself that this too shall pass

The finan­cial mar­kets are his­tor­i­cal­ly cycli­cal. Even if you wish you had sold at what turned out to be a mar­ket peak, or regret hav­ing sat out a buy­ing oppor­tu­ni­ty, you may well get anoth­er chance at some point. Even if you’re con­sid­er­ing changes, a volatile mar­ket can be an inop­por­tune time to turn your port­fo­lio inside out. A well-thought-out asset allo­ca­tion is still the basis of good invest­ment plan­ning.


5. Be willing to learn from your mistakes

Any­one can look good dur­ing bull mar­kets; smart investors are pro­duced by the inevitable rough patch­es. Even the best aren’t right all the time. If an ear­li­er choice now seems rash, some­times the best strat­e­gy is to take a tax loss, learn from the expe­ri­ence, and apply the les­son to future deci­sions. Expert help can pre­pare you and your port­fo­lio to both weath­er and take advan­tage of the mar­ket’s ups and downs.


6. Consider playing defense

Dur­ing volatile peri­ods in the stock mar­ket, many investors reex­am­ine their allo­ca­tion to such defen­sive sec­tors as con­sumer sta­ples or util­i­ties (though like all stocks, those sec­tors involve their own risks, and are not nec­es­sar­i­ly immune from over­all mar­ket move­ments). Div­i­dends also can help cush­ion the impact of price swings. Accord­ing to Stan­dard and Poor’s, div­i­dend income has rep­re­sent­ed rough­ly one-third of the month­ly total return on the S&P 500 since 1926, rang­ing from a high of 53% dur­ing the 1940s to a low of 14% in the 1990s, when investors focused on growth.


7. Stay on course by continuing to save

Even if the val­ue of your hold­ings fluc­tu­ates, reg­u­lar­ly adding to an account designed for a long-term goal may cush­ion the emo­tion­al impact of mar­ket swings. If loss­es are off­set even in part by new sav­ings, your bot­tom-line num­ber might not be quite so dis­cour­ag­ing.

If you’re using dol­lar-cost averaging–investing a spe­cif­ic amount reg­u­lar­ly regard­less of fluc­tu­at­ing price levels–you may be get­ting a bar­gain by buy­ing when prices are down. How­ev­er, dol­lar-cost aver­ag­ing can’t guar­an­tee a prof­it or pro­tect against a loss. Also, con­sid­er your abil­i­ty to con­tin­ue pur­chas­es through mar­ket slumps; sys­tem­at­ic invest­ing does­n’t work if you stop when prices are down. Final­ly, remem­ber that your return and prin­ci­pal val­ue will fluc­tu­ate with changes in mar­ket con­di­tions, and shares may be worth more or less than their orig­i­nal cost when you sell them.


8. Use cash to help manage your mindset

Cash can be the finan­cial equiv­a­lent of tak­ing deep breaths to relax. It can enhance your abil­i­ty to make thought­ful deci­sions instead of impul­sive ones. If you’ve estab­lished an appro­pri­ate asset allo­ca­tion, you should have resources on hand to pre­vent hav­ing to sell stocks to meet ordi­nary expens­es or, if you’ve used lever­age, a mar­gin call. Hav­ing a cash cush­ion cou­pled with a dis­ci­plined invest­ing strat­e­gy can change your per­spec­tive on mar­ket volatil­i­ty. Know­ing that you’re posi­tioned to take advan­tage of a down­turn by pick­ing up bar­gains may increase your abil­i­ty to be patient.


9. Remember your road map

Sol­id asset allo­ca­tion is the basis of sound invest­ing. One of the rea­sons a diver­si­fied port­fo­lio is so impor­tant is that strong per­for­mance of some invest­ments may help off­set poor per­for­mance by oth­ers. Even with an appro­pri­ate asset allo­ca­tion, some parts of a port­fo­lio may strug­gle at any giv­en time. Tim­ing the mar­ket can be chal­leng­ing under the best of cir­cum­stances; wild­ly volatile mar­kets can mag­ni­fy the impact of mak­ing a wrong deci­sion just as the mar­ket is about to move in an unex­pect­ed direc­tion, either up or down. Make sure your asset allo­ca­tion is appro­pri­ate before mak­ing dras­tic changes.


10. Look in the rear-view mirror

If you’re invest­ing long-term, some­times it helps to take a look back and see how far you’ve come. If your port­fo­lio is down this year, it can be easy to for­get any progress you may already have made over the years. Though past per­for­mance is no guar­an­tee of future returns, of course, the stock mar­ket’s long-term direc­tion has his­tor­i­cal­ly been up. With stocks, it’s impor­tant to remem­ber that hav­ing an invest­ing strat­e­gy is only half the bat­tle; the oth­er half is being able to stick to it. Even if you’re able to avoid loss­es by being out of the mar­ket, will you know when to get back in? If patience has helped you build a nest egg, it just might be use­ful now, too.


11. Take it easy

If you feel you need to make changes in your port­fo­lio, there are ways to do so short of a total makeover. You could test the waters by redi­rect­ing a small per­cent­age of one asset class into anoth­er. You could put any new mon­ey into invest­ments you feel are well-posi­tioned for the future but leave the rest as is. You could set a stop-loss order to pre­vent an invest­ment from falling below a cer­tain lev­el, or have an infor­mal thresh­old below which you will not allow an invest­ment to fall before sell­ing. Even if you need or want to adjust your port­fo­lio dur­ing a peri­od of tur­moil, those changes can–and prob­a­bly should–happen in grad­ual steps. Tak­ing grad­ual steps is one way to spread your risk over time as well as over a vari­ety of asset class­es.