Stay Calm: Instead of Panicking, Do This

Moods can change very quickly. At the sight of a small dip or a few frightening news headlines, everyone starts to panic. However, when you take a closer look, you’ll often see there are valid reasons to stay calm.

While conditions can change—indeed, everything can—the fundamental rules of investing seldom do. Anyone who has invested for more than 30 years would have experienced countless moments of fear and uncertainty, possibly enough to drive them toward anxiety medication if they reacted emotionally every time.

Having been in this position for so long teaches you that there are certain things that do not change when it comes to trading and investing.

There will be times when the market crashes. In such moments, it is better not to panic. Instead of panicking, one should return to the basics.

1. Be Familiar With History

It is essential to study the history of money: its origins and when exchanges were established.

There is also a need to understand how investing is done today. What caused the Great Depression? How volatile were the markets in the 1930s and 1960s? What led to the recession of the 1970s? What factors drove market rises and falls in the 1980s?

One must understand the characteristics of recessions and bear markets. Studying the history of investing is much like studying the science behind how the world works.

2. IDENTIFY EMERGING SOCIETAL TRENDS

Pay close attention to the major shifts shaping society—automation, robotics, reshoring of manufacturing, cryptocurrency, energy innovation, and more.

Ask critical questions: What does society need today? What will it demand five years from now? Which companies or institutions are actively building solutions in these areas?

There is an efficient way to uncover these answers.

3. APPLY THE MOORE’S LAW APPROACH

In 1966, Gordon Moore, co-founder of Intel, observed that computing power would roughly double every two years.

At the time, computing capability was extremely limited. In fact, the computer that guided Apollo 11 to the Moon was less powerful than a modern calculator.

Yet computing power has continued to double at that pace ever since his prediction.

Investing in sectors that expand at exponential rates—doubling every fixed period—can generate extraordinary returns. The computer and internet industries grew from modest valuations in the millions to multiple trillions of dollars.

Today, several industries are experiencing similar exponential growth, including computing, genomics, solar energy, data storage, artificial intelligence, and automation.

The goal is to identify as many “Moore’s Law–style” industries as possible, avoid fraudulent projects, and invest in those with genuine long-term potential.

4. USE DATA AND STATISTICS

Whenever possible, use simple statistical tools to test your market ideas.

For example: What typically happens after the market declines for five consecutive days? How does a stock like Microsoft usually behave after a similar streak? What patterns tend to emerge on Mondays when markets close lower on Fridays?

You can also analyze volatility—for instance, what happens when the VIX jumps by more than a certain percentage in a single session.

There are countless questions data can answer, and exploring them helps build intuition about market behavior.

Back in 2019, performing this kind of analysis required advanced skills and tools. Today, with modern AI, it’s accessible to everyone.

5. DO NOT PLACE TRADES BASED ON NEWS

By the time news appears on CNBC or in The Wall Street Journal, it is already outdated. Retail investors are usually the last to act on such information.

6. STUDY STOCKS THAT HAVE CRASHED

When a company reports a shortfall of just a few cents in earnings, many retail investors panic, causing the stock to dip.

At such times, one should ask whether the decline is irrational, because this is often when traders or investors can gain an edge.

7. DIVERSIFICATION IS DIFFERENT FROM WHAT WE THINK

Suppose someone buys Exxon and Microsoft—one oil stock and one technology stock. While this appears diversified, it often isn’t, because many large stocks are correlated.

Today, diversification is more complex and requires creative thinking and structural independence. True diversification involves employing multiple strategies that are uncorrelated and independent of the broader economy.

8. PRACTICE PATIENCE — DO NOTHING

Many investors rely on stop-loss orders. For example, if someone buys a stock at $20, they might automatically sell it at $16 to limit losses.

This approach is often a mistake. Numerous strategies have been tested using custom-built software, and in every case, portfolios that relied on stop losses underperformed over the long term.

True patience works only when position sizes are kept small. By limiting exposure to any single idea, you gain both emotional and financial flexibility to hold through volatility.

Wealth is created by owning a handful of great investments that grow dramatically over time. Instead of price-based exits, it is better to rely on what can be called a story-based exit.