You Need Nerves of Steel to Invest in Stocks – A Wealth of Common Sense

Anyone can say, “I’m a long-term investor” when the stock market is hitting new highs. The real test comes when your portfolio is down 20%, headlines are screaming “crash,” and your inner voice is politely suggesting you sell everything and move to cash. That’s when you discover whether you truly have nerves of steel or just a high risk tolerance on paper.

Stock investing has always been a strange mix of math and emotion. On the one hand, history shows that a diversified stock portfolio has been one of the most reliable ways to build wealth over decades. On the other hand, the journey is full of gut-wrenching drops, confusing recoveries, and long stretches where it feels like nothing is working. Having “a wealth of common sense” isn’t just a catchy phraseit’s a survival skill.

This article breaks down why investing in stocks requires emotional toughness, what history actually says about market volatility, and how to build a common-sense investing plan you can stick with when things get rough. None of this is personalized financial advice, but it is the kind of grounded perspective that can help you stay calm when the market is anything but.

Why Stocks Really Require “Nerves of Steel”

Ben Carlson, CFA, author of the blog and book A Wealth of Common Sense, often points out that the hardest part of investing isn’t understanding the numbersit’s managing your own behavior when markets get messy. Stock returns are the reward investors get for tolerating uncertainty, volatility, and occasional full-on panic.

Consider what you’re signing up for when you buy stocks:

• Regular drawdowns: The stock market routinely experiences pullbacks of 5–10% in a normal year, and deeper corrections of 10–20% show up more often than most people realize.
• Bear markets: Bear marketsdrops of 20% or moreare not rare events. Over the long history of the U.S. stock market, they come around every few years, for one reason or another.
• Scary headlines: Every downturn comes with a story: recessions, wars, pandemics, elections, bubbles popping, or some new acronym you suddenly need to worry about.

From a distance, these ups and downs get smoothed into a neat line trending upward over decades. Up close, it feels like chaos. That emotional whiplash is why nerves of steel matter. It’s not about being fearless; it’s about being steady when fear is everywhere.

What Market History Actually Tells Us

If you zoom out, the stock market looks less like a casino and more like a very moody but ultimately productive machine. Historically, U.S. stocks have delivered attractive average annual returns over long periods, even though they rarely match that “average” in any given year.

Several long-term patterns stand out:

• Bear markets don’t last forever. Historically, bear markets have tended to last around a year or so on average, with recovery to previous peaks taking a couple more years. Some are shorter, some are longerbut they do eventually end.
• Drawdowns are normal, not an error. Peak-to-trough declines of 10%, 20%, or more are part of the cost of owning stocks, not a sign that “this time it’s different” every single time.
• Most positive years outnumber the bad ones. Over many decades, the market has delivered more up years than down years, and strong gains have often followed painful declines.

The problem is that you don’t live in a spreadsheet. You live through the drawdowns in real time. Your retirement account drops. Your news app explodes. Your group chats go from memes to macroeconomics. Even if you “know” markets recover, it doesn’t always feel that way in the moment.

The Real Risk: Your Own Behavior

Behavioral financebasically, the study of how real humans (not robots) make money decisionshas a simple message: your reactions to the market may be more dangerous than the market itself.

Some of the greatest hits of investor self-sabotage include:

• Loss aversion: Losing $100 hurts more than gaining $100 feels good. That pain often pushes investors to sell at the worst possible time.
• Herd behavior: When everyone else is panicking, selling feels safe. When everyone else is euphoric, buying more feels smartregardless of price.
• Overconfidence: After a few good years, it’s easy to feel like a stock-picking genius and take on far more risk than your nerves can handle.
• Hyper-monitoring: Checking your portfolio multiple times a day magnifies every blip and encourages impulsive decisions.

These biases don’t show up on your account statement, but they show up in your results. Many studies have found that the “average investor” tends to underperform the very funds and indexes they invest in simply because they buy high and sell low, driven by emotion rather than a plan.

Nerves of steel, then, don’t mean never feeling anxious. They mean acknowledging that your feelings will get loudand choosing not to let them drive the car.

Common-Sense Strategies for Surviving Stock Market Volatility

So how do you actually build an investing approach that doesn’t fall apart every time the market throws a tantrum? You combine simple strategies with realistic expectations.

1. Start With Your Time Horizon

Stocks are long-term tools. If you need the money in one or two yearsfor a house down payment, tuition, or a business launchyou probably don’t want that cash riding the roller coaster.

But for goals 10, 20, or 30 years out, short-term volatility becomes less important than long-term growth. Your nerves get stronger when your money is properly matched to your time frame. It’s much easier to ride out a 25% drop in a retirement account you won’t touch for 25 years than money you need next summer.

2. Diversify Like an Adult, Not a Lottery Player

Nerves of steel don’t mean going all-in on one hot stock and hoping for the best. Common sense says you spread your risk:

• Use broad index funds or ETFs that hold hundreds or thousands of companies.
• Mix different asset classesstocks, bonds, maybe some cashaccording to your goals and risk tolerance.
• Avoid concentrating too much in your employer’s stock or a single sector.

Diversification doesn’t prevent losses, but it helps prevent one bad bet from blowing up your entire future.

3. Harness Dollar-Cost Averaging

Dollar-cost averaginginvesting a fixed amount on a regular scheduleis one of the simplest ways to manage both risk and emotions. When prices are high, your set contribution buys fewer shares. When prices are low, the same amount buys more.

This is exactly what happens in many retirement plans: money goes into the market every paycheck, whether the headlines are cheerful or terrifying. You never have to decide whether “now” is the perfect time to buyyou just keep going. Over time, this can smooth out your purchase prices and train your brain to see downturns as opportunities rather than disasters.

4. Automate as Much as Possible

One underrated investing superpower is lazinessstrategic laziness, anyway. Automating contributions and rebalancing takes your jumpy emotions out of the day-to-day decision loop.

Set up automatic transfers into your investment accounts, automatic purchases of your chosen funds, and periodic automatic rebalancing. The more your plan runs on autopilot, the less tempted you are to tinker every time the market flinches.

5. Build a Cash Cushion for Your Sanity

Nothing rattles your nerves like needing money right now from an account that’s down 25%. An emergency fundoften three to six months of essential expenses in cash or a high-yield savings accountcan dramatically lower your stress during market downturns.

Knowing your basic needs are covered makes it much easier to let your long-term investments ride out the storm without panic-selling them at the worst moment.

6. Choose Risk You Can Sleep With

There’s the risk level that looks good in an online calculator, and then there’s the risk level that lets you sleep at night. If a 20% drop in your portfolio makes you queasy, that’s not a moral failureit’s valuable information.

Adjust your stock/bond mix so that the inevitable ups and downs are tolerable. Yes, more stocks may offer higher expected returns, but only if you can stick with them. A “slightly less aggressive portfolio you can actually hold” usually beats the “perfect aggressive portfolio you abandon in the next crash.”

When Nerves of Steel Can Backfire

There’s a flip side to courage: overconfidence. Sometimes “nerves of steel” becomes “I refuse to admit this is a bad idea.” Common-sense investing means recognizing when your bravery is actually recklessness in disguise.

Red flags that your “courage” might be going too far include:

• Heavy leverage: Borrowing to invest amplifies both gains and losses. A sharp downturn can force you to sell at exactly the wrong time.
• Extreme concentration: Putting most of your wealth into a single stock, sector, or themeeven one you lovecan be devastating if it goes wrong.
• Story-only investing: Holding onto a stock purely because you like the story, the CEO, or the online hype, while ignoring deteriorating fundamentals.

Real nerves of steel aren’t about doubling down on every risky bet. They’re about having the discipline to follow a reasonable plan, admit when you’ve taken on too much risk, and avoid turning investing into a high-stakes thrill ride.

Simple Rules for Common-Sense Long-Term Investing

At its core, a “wealth of common sense” approach to stock investing comes down to a few straightforward rules:

• Know your time horizon and invest accordingly.
• Use diversified, low-cost funds as your core holdings.
• Automate contributions and rebalancing so emotion doesn’t run the show.
• Expect volatility, don’t be surprised by it.
• Avoid big, irreversible mistakespanic selling, over-leveraging, or betting the farm on one idea.
• Focus on “time in the market,” not perfect timing.

None of these rules require advanced math. They do require humility, patience, and yes, some nerve. But that’s exactly why the stock market has paid long-term investors a meaningful return: you’re being compensated for the emotional discomfort and uncertainty along the way.

Real-World Experiences: What Nerves of Steel Look Like in Practice

The idea of “nerves of steel” can sound abstract until you watch real people live through real market swings. Here are a few composite examplesbased on common patternsthat show how mindset and behavior shape outcomes.

The Investor Who Stayed the Course Through a Crash

Emma is in her mid-30s, saving aggressively for retirement. She invests most of her long-term money in a diversified stock index fund. When a sudden market shock hits and stocks drop 25% in a matter of weeks, she’s understandably nervous. Her account balance falls faster than it’s ever grown.

But before the chaos, Emma had done her homework. She knew that sharp drops are part of stock market history, that bear markets eventually end, and that selling during a crash often locks in losses. She also keeps six months of expenses in cash, so she doesn’t need to tap her investments.

Instead of panic-selling, she does three things: stops checking her balance every day, keeps her automatic contributions going, and reminds herself that she doesn’t need this money for decades. A year or two later, as the market recovers, her earlier contributionsespecially those made during the downturnlook surprisingly smart.

That’s nerves of steel: not silence in the face of fear, but staying aligned with a long-term plan when short-term emotions are loudest.

The Investor Who Sold at the Bottom

Now meet Jason. He also invests for the long term, mostly in stock funds. But he never really made peace with volatilityhe tolerated it as long as markets were friendly. When a severe downturn hits, Jason watches his balance daily. Each drop feels like a personal judgment on his financial decisions.

After a few brutal weeks, he decides he “can’t take it anymore” and sells a large portion of his stock holdings, planning to “get back in when things feel safer.” Unfortunately, by the time the news cycle calms down and markets have recovered, prices are much higher. Jason ends up with a painful combination: selling low and buying back higher.

Jason didn’t lack intelligence or information; he lacked a structure for managing his emotions. His plan was fine on paper, but his nerves weren’t prepared for real-world volatility.

The Overconfident Risk Taker

Then there’s Mia, who discovered investing during a strong bull market. Her first few pickspopular tech stocks and trendy themeswent up quickly. Her social feeds were full of people bragging about big gains, and it was easy to feel like she’d cracked some secret code.

Over time, Mia concentrated a large part of her portfolio into a handful of high-flying names. When sentiment turned and those same stocks fell 40–60%, her confidence collapsed with them. The losses weren’t just numbers; they represented vacation plans, future upgrades, and a sense of control over her financial future.

Mia’s nerves of steel had been built on short-term success, not long-term perspective. After regrouping, she moved toward diversified funds and a more balanced allocationstill invested in stocks, but in a way that didn’t depend on a few risky bets holding up forever.

Lessons From These Experiences

These stories underline a few key truths:

• Preparation beats prediction. You don’t need to know when the next downturn will happen; you need a plan for what you’ll do when it does.
• Emotional risk is real risk. If your strategy assumes you’ll be perfectly rational under stress, it’s probably more aggressive than you think.
• Systems support your nerves. Automation, diversification, and a clear time horizon make it easier to stay invested when markets misbehave.

Nerves of steel aren’t something you either have or don’t. They’re something you build over time by learning how markets work, designing a portfolio you can live with, and experiencing a few storms without jumping overboard.

Conclusion: Courage, Patience, and a Little Common Sense

You don’t need to be a financial genius to invest in stocksbut you do need patience, a willingness to endure uncomfortable periods, and a basic understanding of how markets behave. That’s the essence of a “wealth of common sense.”

Stocks can be brutally volatile in the short term and remarkably generous in the long term. Your job isn’t to outsmart every twist and turn in the market. It’s to build a sensible plan, stick with it through the noise, avoid catastrophic mistakes, and let time and compounding do the heavy lifting.

Nerves of steel don’t make you immune to fear. They help you feel the fear, recognize it for what it is, and keep investing anyway.