Choosing what to ignore is critical to maintaining a long-term focus

By Jason Zweig

To paraphrase the boxer Mike Tyson, investors always have a plan until the market punches them in the face.

After U.S. stocks dropped roughly 10% in ten trading days, it's more important than ever for individuals to understand what it means, and what it takes, to be a long-term investor. There was a lot of crowing this past Tuesday when the S&P 500 rose nearly 2% after a 4.1% drop on Monday. Cries of “buy on the dip” rang throughout the land.

Buying on the dip, when stocks go down a few percentage points, isn’t so hard. Can you keep buying, or even merely hold on, if stocks go down 50% or more? That’s the question I’ve been asking myself this past week -- not because I believe that’s about to happen, but because I know it can.

The best way to answer that question is to look back at what you did in 2008 and 2009, if you were investing then.

I did just that last night, poring through my old account records online to check whether my memory is accurate. Humans have a remarkable ability to make rearview mirrors out of rose-colored glass. So I wasn’t sure whether my recollection of buying more stocks throughout 2008 and early 2009, as the market kept dropping in nauseating swoops, was just a myth I’d been telling myself.

It turned out that between the market’s peak on Oct. 9, 2007 and its bottom on March 9, 2009, I repeatedly, almost obsessively, pumped any idle cash into stocks.

According to my account statements, in those 18 months from October 2007 through March 2009, I shoveled more money into stocks 85 times, as the U.S. stock market fell 55%. That doesn’t include 36 automatic purchases as part of my decades-long practice of dollar-cost averaging equal amounts monthly into my two main stock funds.

All this makes me sound so implacable and calm and wise. But hindsight is full of lies.

I did add all that extra money deliberately. Week after horrifying week, the more the market went down, the more determined I became. It was kind of fun at the beginning. Then it became work, then drudgery, until the discipline mingled with self-doubt and began to verge on misery.

On March 6, 2009, with the total value of my funds down by more than 35% despite all the money I had poured in, my resolve finally faltered.

I had just written a column advising investors to react, if they must, only in baby steps rather than in big impetuous moves. After nearly two years of throwing bushels full of dollars into the flames of a falling market, I decided to move a tiny amount of one of my Individual Retirement Accounts out of a stock fund and into cash.

I immediately felt better, and in that moment I felt an overpowering intuition: If I’m finally selling instead of buying, stocks must be about to hit rock-bottom. That lifted the cloud, and the next week I resumed adding more.

Sure enough, the bull market began on March 9, 2009. Later that year, with stocks roaring upward, I stopped adding extra purchases beyond my automatic monthly contributions.If I told you the total amount of money I added during the bear market, my wife would kill me now; if I had told her at the time, she would have killed me then. It felt wildly risky, because it was. Markets don’t always recover quickly; sometimes, they don’t recover at all. Just ask Japanese investors how that “stocks for the long run” stuff has worked out for them.

As I learned when I had when I had my DNA tested in a genetics lab at the University of Pittsburgh years ago, the discipline to keep investing into a falling market doesn’t appear to be something I was born with.

A happy few investors, among them Warren Buffett, his business partner Charles Munger and their mentor Benjamin Graham, may have long-term thinking built into them by nature.

The rest of us have to cultivate it by nurture: by studying the writings and careers of such great investors, by familiarizing ourselves with financial history, by analyzing our own behavior during past bear markets and, above all, by cultivating good habits and mental hygiene. Choosing what to ignore -- turning off constant market updates, tuning out pundits purveying the latest Armageddon -- is critical to maintaining a long-term focus.

Will I plow extra money into the stock market again if it suffers another catastrophic drop? No, because my family has better uses now for any spare cash. Will I sell stocks in a bear market? Based on my past behavior, I think I can say confidently say no -- but I have no illusions about how much money I might lose, or how long I might have to hang on to recover those losses. You shouldn’t either, especially if you are in or close to retirement.

Write to Jason Zweig at intelligentinvestor@wsj.com, and follow him on Twitter at @jasonzweigwsj.