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In moments of market decline fear, it’s vital to manage your emotions. One way to do so is by evaluating five factors to better understand your current financial position:

📌 Short-term cash needs: Consider how much you will need from your portfolio in the next five years. Keep these funds in safer investments, like short-term bonds.

📌 Future contributions: Younger investors have time to accumulate wealth through ongoing contributions, which can mitigate the impact of short-term market losses. The concept of "human capital" or future earnings plays a key role in managing risk.

📌 Total wealth in stocks: Many people hold only a portion of their wealth in stocks when factoring in real estate, cash, and other assets. A market decline, therefore, often has a limited impact on total wealth.

📌 Risk tolerance: Assessing potential losses in a market crash (average loss around 35 percent) can help you gauge your comfort with risk and decide if you should adjust your stock exposure.

📌 Economic health: Stock returns are linked to economic growth. Although downturns occur, the U.S. economy has historically shown resilience, rebounding even after severe crises.