Recent portfolio falls can be difficult to stomach and are unfortunately sometimes viewed through the media prism of what can feel like mass hysteria. In these difficult times it pays to keep a cool head and stick to your investment plan.

Summarised below are three mistakes commonly made in market downturns which may be helpful in managing your emotions around stock-market uncertainty.

1. Failing to Have a Plan

Investing without a plan is an error that invites other errors, such as chasing performance, market-timing, or reacting to market “noise.” Such temptations multiply during downturns, as investors looking to protect their portfolios seek quick fixes.

Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralysed, unable to implement an investment strategy or to rebalance a portfolio as needed. Discipline and perspective can help us remain committed to long-term investment programmes through periods of market uncertainty.

It is generally best to remain both patient and invested in a broad mix of global stocks and high-quality bonds so that you are better positioned to buffer declines in the equity market. Investing across global markets can help protect against shocks although at times like these often all assets are moving downwards. While this is particularly unnerving it is often a sign that markets are nearing a low as investors are forced sellers of even defensive assets. Periodically rebalancing your portfolio can keep your asset allocation in line with your investment goals and ensures that funds are recycled into the areas looking better value.

2. Fixating on “losses”

Let’s say you have a plan, that your portfolio is balanced across asset classes and diversified within them, but your portfolio’s value drops significantly in a market swoon. Don’t despair. Stock downturns are normal and most investors will endure many of them. Even in good years there can be short term setbacks.

Between 1980 and 2019, for example, there were eight bear markets in stocks (declines of 20% or more, lasting at least 2 months) and 13 corrections (declines of at least 10%), according to data from Vanguard Investment Strategy Group as of December 31, 2019.

While some investors will remember the crash of October 1987, the year itself was actually a positive one. Unless you sell, the number of shares you own won’t fall during a downturn. In fact, the number will grow if you reinvest your funds’ income and capital distributions. If you were invested right in the first place, there's no need to change tactics.

No one knows what the future holds. But understanding the past can help us avoid impulsive decisions that may cause far more harm than good to a portfolio's long-term value.

3. Overreacting or missing an opportunity

In times of falling asset prices, some investors overreact by selling riskier assets and moving to government securities or cash equivalents. Or they may embrace the familiar, perhaps moving from international to domestic markets, in a display of “home bias.”

But it’s a mistake to sell assets amid market volatility in the belief that you’ll know when to move your money back to those assets.

That’s called market-timing, and the evidence shows that the largest market upswings often follow immediately after the downturns. If you are holding cash you will miss them. Alternatively, you may be tempted into something completely unfamiliar such as that rare or unusual investment that has performed particularly well during the downturn only to see it fall sharply as markets recover. Generally, it is best to stick with what you know.

David Thomson is chief investment officer at VWM Wealth