Last week’s OP-ED piece in The New York Times, “Buy American. I Am.”, by Warren Buffett was interesting on several fronts.

Long-Term Thinking

As you know, Mr. Buffett has had a lengthy history of advocating a “long-term” perspective of common stock ownership. He is expressing the traditional wisdom that although stock prices can be wildly volatile in the short run, over time these securities have generally provided returns significantly above more conservative investments of savings accounts and Treasury bonds.

In the article, Warren Buffett was reminding us what we already know but tend to lose sight of during times of uncertainty – there will be periods when the stock market endures extreme levels of volatility and experience significant declines in price.

Stay the Course

With that in mind, I want to take this opportunity to explore why, if we inherently know the above to be true, is it still so difficult for some investors to stay the course during times of market turmoil like we are currently experiencing?

We all know the stock market is volatile, but why is it that we love the volatility on the upside but detest the volatility on the downside? The answer to that question is probably an easy one, having to do with the emotions that are a natural part of being alive.

To put it bluntly, we all like to make money and no one likes to lose money.

Embrace Stock Market Volatility

Maybe that is too simplistic an answer, but I think that pretty much sums it up. How can we make it easier on ourselves to accept, if not embrace, this stock market volatility on the downside, so that we utilize the inherent benefits of common stocks and potential for higher returns over time to our advantage?

The first question we need to ask ourselves is, “Why am I feeling so anxious about the stock market’s decline?” Again, the easy answer is, “Because I hate to lose money!”

But if we analyze our response a little closer, a more authentic answer might be, “Because I feel queasy about an uncertain future, and I really don’t want to compromise or reduce my current standard of living sometime down the road.”

In all likelihood we have grown accustomed to our current lifestyle that has evolved from the countless financial decisions we have made over the years.

Financial Plans Will Yield Answers

The best way to determine whether or not you can sustain your current lifestyle is to create a financial game plan; a critical first step in turning an uncertain future into a future that offers clarity of vision, especially with your financial decisions.

This gets back to the issue of investing in the stock market. For the purposes of being proactive in your financial planning efforts, have you built into your plan the effects of a 30-35 percent decline in the stock market, and how that would affect your overall well-being? If not, why not?