It can be fun to ponder the details of your specific portfolio allocation. Should it be 70% stocks? 75%? Maybe even 80%?! We had a terrific question from reader “Vince” about just this idea:

Those conversations move the needle and are essential to an overall financial plan.

But there are far more critical portfolio questions to ask yourself. FAR more important. Namely questions like…

• How would you have acted on September 12, 2001?
• How about during March and April of 2020?
• What about during the depths of 2007 & 2008?

In other words, how will you think about your investments during the worst times in society? During the worst times in the Economy? When your account is down 6- or 7-figures, the headlines are bleeding, and there is seemingly no end in sight?

THAT is an important question. I hope your answer isn’t, “I’ll panic.”

The wonderful thing about these thorny questions is that you don’t have to use your imagination. These events were real. Perhaps you even lived through them and invested through them. We aren’t making up terrible hypotheticals. This isn’t fear-mongering. It’s “reality-mongering.” We’re reliving the actual past.

• After September 11th, an S&P 500 index portfolio would have lost 14% in one week.
• During COVID: down 34% over 3 weeks.
• And in the depths of 2009: down 50% over 18 months.

These events and their portfolio consequences were real. Similar events will happen in the future. It’s not if, it’s when.

And yet, when we zoom out over the longer timeline? I’d submit that holding for the long run – even during the depths of Investing pain – has worked out well for investors like us. It’s never easy. But it becomes a little bit easier if we think about it beforehand.

How will you act during those bad times? Will your actions damage your long-term financial plan? Will you feel the need to “sell to survive?” Or will you stay strong, perhaps even rebalancing into the pain?

Should you be 70% stocks or 80% stocks? Sure, you should have an answer to that question. But it won’t matter if you panic during the next stock market scare.

Remind yourself of historical stock market context. Understand what those scenarios would do to your current portfolio. What does “14% down in a week” or “50% down over 18 months” look like? What does it feel like?

And ask yourself, “How will I react?”

That’s a question that matters.

Thank you for reading! If you enjoyed this article, join 8500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week. You can read past newsletters before signing up.

-Jesse

Want to learn more about The Best Interest’s back story? Read here.

Looking for a great personal Finance book, podcast, or other recommendation? Check out my favorites.

Was this post worth sharing? Click the buttons below to share!

Jesse Cramer Writer & Financial Planner

Jesse Cramer is the writer of The Best Interest blog, the voice behind The Best Interest Podcast, and works full-time as a fiduciary financial planner for Cobblestone Capital Advisors in Rochester, NY.