My fiancee is from Georgia and has never walked on a frozen body of water (outside a small skating rink) in her life.

A few weeks ago when we went through that cold snap where temperatures barely rose above single digits in Boston, we wandered out on the ice of the frozen-over pond in the Public Garden.

She was extremely hesitant at first. It didn’t matter that the pond was shallow and the ice was obviously frozen. It didn’t matter that, as a native New Englander, I could tell that the ice was safe.

My fiancee questioned whether the ice was perfectly safe to walk on, and she wondered how I could possibly know that it was. What guaranteed you wouldn’t just shoot right through at some point in the middle of the pond?

That was a perfectly reasonable question for her (even though to me and everyone else from Boston, it might have seemed silly). She had no experience or knowledge of the situation, and her first reaction was to judge walking out to the middle as a high-risk activity.

It could have been, had she been alone and decided to walk out on the ice of a bigger body of water without knowing if it was safe or not. And really, there was no absolute guarantee that the ice giving way would not happen, period.

But the odds of that were slim to none.

Eventually, though, we did walk out on the pond. Of course, she made me go first and followed my footsteps carefully, making sure not to stray from the path I took.

Many people have this kind of experience — not with tiny ponds full of thick ice, but with investing.

Are You Investing on Thin Ice?

When you don’t know what you’re doing and don’t understand the situation you’re in, investing becomes a high-risk activity. This might almost be more true when you see stock market highs; people tend to overreach and get greedy during these times.

In fact, when you invest without understanding what you’re doing it can look a lot more like gambling (or just downright dangerous, like walking out on thin ice).

But if you understand financial markets, know how to minimize risks, and can make reasonable, rational decisions based on your knowledge and expertise, investing can be a great way to create and grow wealth.

Of course, just like that ice, there’s no guarantee that you will achieve positive results. It’s not about eliminating all risks and creating a 100% guaranteed situation for ourselves, though.

With the right, evidence-based and researched-backed investment strategies, we can feel pretty confident that our actions in the market will help us reach our financial goals over time.

The investment strategies and education I provide my clients allow them to carefully consider the major risk factors (testing the waters), and to move confidently in the direction of their specific goals. We still need to move with caution along the way and not get overly excited about market events (whether good or bad).

If we can stay the course, we can navigate the markets together and end up in a place where they’ve created and grown the wealth they need to live the life they want.

But the journey isn’t without challenges and potential pitfalls.

You know, like when you do walk out on that ice, fully confident you know what you’re doing and you’re safe — and then you hear a tremendous boom or crack as a part of the ice shifts or settles?

Those shocking and surprising things happen in the market, too. They’re called corrections, downturns and even crashes.

Understanding Stock Market Highs and Inevitable Market Crashes

That resounding crack can be absolutely terrifying when you’re standing in the middle of not just a frozen pond but a giant iced-over lake and a whole lot of freezing water beneath that layer of ice.

But panicking can lead to bad decisions. It can cause you to leap and move in a way that leaves you in a worse position than you were if you had just stayed put, remained calm, and stuck to your plan without overreacting.

Staying calm and rational when you really want to react to your emotions is tough no matter what, but it can be very difficult to do when you invest.

There are a few reasons for this:

1. Everyone else around you might be running around in a panic, shouting doom and gloom.
2. We suffer from countless cognitive biases that lead us to act irrationally (even when, intellectually, we know better).
3. It can be almost literally painful to sit and watch your “losses” add up — and really, really challenging to believe that those losses aren’t real (or realized), unless you sell.
4. It’s hard to sit and do nothing when you have the option to jump up and do something — but doing nothing is often the smartest, most strategic investment move out there.

I could go on and on, but telling you all this may not do a bit of good when the market crashes again.

And I know: the DOW and S&P 500 indexes just keep breaking records. We keep seeing new stock market highs almost daily. Why are we talking about a crash now?

Well, for one, the “reacting emotionally is bad” applies when we’re seeing stock market highs as well as lows. Instead of panic, though, it’s overconfidence that leads to careless investing mistakes.

Because at some point, the market will experience a downturn. Those numbers will fall — and with them will go the confidence of many an average investor who was walking out on thin ice with no knowledge, understanding, or guidance.

Preparing for Investing Panic (So That You Don’t Panic Yourself)

We don’t know when a crash or even just a simple correction will happen. Nor do we know how far it will go when it does happen.

All we know is that it will happen at some point in the future… which is kind of comforting when you know and understand financial markets. It’s just the way they work, and downturns are part of the game.

That means you can plan for them and you have no excuse for being surprised when things stop going up and start going down instead. The market is supposed to move, and you shouldn’t be shocked when it does.

That movement is volatility, and market volatility simply describes change (whether that looks like new stock market highs or another big crash). The price of stocks is based on current information and we always have new information continually coming through the market.

Every new piece of information changes the price of stocks. Most of the time that’s by a small amount. Sometimes, it’s by a lot.

What does all this mean?

I talk a lot about staying consistent because you must stay steady and hold to a rational, evidence-based investment strategy if you want to achieve financial success.

But this is really hard to do in the moment — especially if that moment is a market crash that you have to live through. Most people can’t do it.

How to Beat the Average Investor: Stay Consistent and Stick to Your Strategic Investment Plan

Most people — the average investors, the ones trying to navigate their way through the markets with no plan, no guidance or accountability, and no deep knowledge of where they’re putting their money or why — jump when the market goes down.

They get scared. They end up selling when there’s a full on panic, which means they sell at the bottom.

They sell low.

Then those same people wait to get back in until everything seems fine; until things are looking better and they feel more confident the market can only go up.

So they buy high.

This is exactly why average investors fail to beat even the S&P 500, which is just a broad index that tracks US large (market) cap companies.

Yup, you read that right: average investors don’t even manage to keep up with the market. (And no, active managers are no better. In fact, they’re usually worse.)

They end up doing worse because they get in their own way!

The more we talk about the fact that a market downturn is happening at some unknown point in the future, the more normal that becomes… and hopefully, the less susceptible you’ll be to panic and irrational investor behavior.

If you stay consistent — which means, not trying to time the market or move your money in and out depending on how you feel about the current situation — you don’t need to worry about downturns.

If you have a strategic investment plan backed by empirical research and evidence and you stick to it, you don’t need to worry about downturns.

If you have a fee-only financial planner who can help you stay the course even when you’re reeeeally tempted to jump ship, you don’t need to worry about downturns.

(Of course, it must be said: past performance is no guarantee of future results. This should not be construed as investment advice. Please consult with your financial planner before making any decisions with your investment portfolio.)

But regardless, you do need to know they’re coming. This isn’t about sticking your head in the sand and ignoring everything (although, some investors who can’t seem to help themselves and just have to jump in and meddle with their assets when they’d be better served not fiddling with them might benefit from the head-in-the-sand approach…)

You don’t have to look at a falling or decreasing market as a “bad” thing, though. (Just as stock market highs shouldn’t automatically equate to “good.”)

It’s just natural market behavior. And the thing about financial markets is that, in the entire history of the US stock market, it’s only trended upward.

As confident as you can feel that a downturn will come our way, you can confidently, reasonably expect what will follow that downturn:

A market that climbs upward again.