Despite the historical upward trend in the price of stocks, it’s clear the stock market makes no guarantee of investment growth from month to month or even year to year. The stock market and the economy go through waves of growth and decline on a surprisingly regular pattern—so regular, in fact, that this ebb and flow is known as an “economic cycle.” It’s comparatively easy to invest successfully on the growth curve of the cycle, when the stock market is growing in value and your savings are increasing. But investors, even professional ones, can get spooked when stock prices drop—especially if they drop faster and for longer periods than most investors have personally seen before—and the economy moves into the decline curve of its cycle. A big part of your financial success will turn on whether you can stick to your plan even when the stock market and the economy seem to be coming unhinged.

There are five fundamental steps you should take if you feel like a decline in the stock market or an economic recession is tempting you to abandon your investment plan and sell your stock investments. They’re basic principles that mirror concepts we deal with in depth elsewhere in this book, but they bear repeating in a discussion about how to gear your expectations and emotional responses to an economic slump.