INVESTING IS A GAME of subtraction—and I’m not talking about this year’s stock market decline.
Wall Street sells the fantasy of market-beating returns, using it to seduce investors into adding new stocks and funds to their holdings. Result? Performance-chasing investors cobble together badly diversified portfolios that they imagine will beat the market, while overlooking the hefty costs that Wall Street charges. This is a strategy that’s almost guaranteed to make heaps of money—for brokerage firms and money managers.

IT’S BEEN AN unpleasant seven weeks for the stock market. Is it over? I have no clue. Still, last week’s rally offered investors at least a temporary respite. My suggestion: Use this moment to think about the market’s recent rollercoaster ride—and how you’ve handled it emotionally.
Financial experts distinguish between risk capacity and risk tolerance. It’s a useful distinction. Risk capacity is our objective ability to take risk based on our personal situation, notably the reliability of our paycheck and our investment time horizon.

HERE IS WHY I DON’T trade, and don’t make big market bets, and why you shouldn’t, either.
Headlines last Monday at 6 a.m.: Nation Braces for Brutal Week, At Least a Fourth of U.S. Economy Goes Idle, British Prime Minister Boris Johnson Hospitalized.
Headline at 9:30 a.m.: Dow Surges as Tech Stocks Rally
I got spooked last weekend. It was epic. I was actually scared after days of hearing about the bungled federal response to the pandemic and about states fighting over medical supplies.

I RECENTLY DISCUSSED retirement plans with my old college roommate, Joe, who now runs his own business. As we wrapped up the conversation, Joe asked if I had any book recommendations.
I told him I was about to start Good to Great, the management book by Jim Collins. It’s been a huge bestseller, with four million copies sold. Joe immediately shot back, “John, that book demonstrates precisely why low-cost index funds have to be the answer for most retirement plans.

I MET WITH MY financial advisor last week to discuss my portfolio’s performance in the first quarter. This was the first time I’d looked at my investments since the start of the public health crisis and economic shutdown.
My portfolio, with a target mix of 35% stocks and 65% in bonds and cash investments, was down 6.8% for the quarter, while the S&P 500 was off 19.6% and the Dow industrials fell 22.7%, including reinvested dividends.

THE PLOT, THE SCRIPT and the characters may have changed. But we’ve seen this movie before.
The current stock market swoon strikes many folks as unprecedented: It’s the frantic financial sideshow to a devastating global tragedy—one that’s seen 1.1 million people fall ill and 60,000 die, with every expectation that the numbers will be many multiples worse before the COVID-19 pandemic is over.
Yet, on closer inspection, 2020’s bear market doesn’t seem so different from earlier market declines.

ALTHOUGH THE 2020 market plunge isn’t even six weeks old, there are already lessons we can learn from this financial crisis that can help us better manage our investment portfolio. Here are six takeaways from the current downturn, which has left the S&P 500 off 25% from its Feb. 19 high:
1. During a financial crisis, you often hear the phrase, “Stay the course.” It’s meant to encourage investors to stick with their financial plan during difficult times.

BERKSHIRE HATHAWAY Chairman Warren Buffett, in his most recent annual report, described an event that occurred at a Berkshire subsidiary last year. Late one night, a fire spilled over from a neighboring business, resulting in significant damage to the Berkshire facility, forcing it to shut down.
Fortunately, no one was injured and, as Buffett notes, the losses will be covered by insurance. Problem is, one of the company’s largest insurers was, as Buffett put it,

IT’S BEEN A TAD OVER five weeks since the S&P 500 hit its all-time high. Five weeks have never felt so long.
It isn’t just all the articles that I’ve been writing and editing. I’ve also been busy with my own finances. I was on the verge of closing on the sale of my apartment here in New York and moving to Philadelphia. But then my buyer’s business collapsed amid the coronavirus slowdown and,

THE PAST FEW WEEKS have brought back memories of the 2008 financial crisis. Back then, stocks were at bargain prices, but I had little money to invest. Today, my financial house is much stronger—and I want to be ready to buy if stocks get dirt cheap.
I’ve already made some portfolio adjustments. But from here, my plan is to keep an eye on stock market valuations. A large percentage drop by the market averages might—by itself—create the false impression that stocks are cheap,

I’M DETERMINED NOT to repeat my mistakes of 2008-09. I was ruined by that financial crisis or, more accurately, I let it ruin me. I led into it with my chin.
I’ll spare you the details of my personal situation in the years leading up to the crash, but the upshot is I was egotistical, financially reckless and looking for a big score. As the crisis unfolded, I piled risk upon risk, mistake upon mistake.

TIMES LIKE THESE test the mettle of investors. Want to pass the test? Here are 27 things to do now:

Keep buying stocks. Remember your regret at failing to load up on bargain-priced shares in early 2009? Don’t make that mistake again.
If you’re panicked and tempted to dump stocks, talk to a friend or, alternatively, hire a financial advisor—one required to act as a fiduciary—to coach you through this decline.
Ponder what makes you happy.

AS THE STOCK MARKET repeatedly hit new highs in recent years, my net worth reached levels I hadn’t expected. But instead of feeling good about it, I was getting annoyed. Most of my retirement dollars had been invested over the past decade at high stock market valuations. I could use a good bear market so that, in my few remaining years in the workforce, I bought stocks cheap.
I also worried that a prolonged downturn at the worst possible time might derail my early retirement plans.

LAST FRIDAY AT 7:16 A.M., I sent an email to HumbleDollar’s editor. We were discussing what this blog post should be about. This was before I got the news alert that S&P 500 futures were up bigtime, following the historic selloff the day before.
I concluded my email to Jonathan this way: “The market never gives you the big fat target you want. I’ve got great plans if the market behaves today like it did yesterday,

FOLLOWING THE STOCK market’s steep decline, sensible investors are faced with three alternatives. The first two are fairly straightforward, but the third option is worth some discussion.
1. Do nothing. If all of your assets are in retirement accounts and you’re comfortable with your risk level, you might choose to tune out the news and do nothing at all. Similarly, if your portfolio doesn’t include any stock market investments, you might opt to watch the market upheaval from a distance,