1. The market is resilient

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Stocks always bounce back.

No matter how awful things may look on a particular day or during a particular week, stocks generally make back their losses and then some.

"In the short term, the stock market could fluctuate up and down," says Tenpao Lee, a professor of economics at Niagara University. "In the long term, the stock market will always move up."

Humans are emotional creatures, and we can react impulsively when afraid. Smart investors shake off the panic and keep their eyes peeled for buying opportunities, knowing that the market will come back.

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2. You have goals

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A downturn is a good opportunity to reflect on your long-term goals.

Aren't you invested for the long haul, working toward a big goal down the road — maybe a comfortable retirement? The worst thing is to go off track by ditching investments just because Wall Street has a rough couple of days.

If volatility in your accounts keeps you up at night, maybe you need to reevaluate your investment mix. Your money should be diversified, to help you weather these storms.

The best approach is to not look at your battered balances and keep your hands off your portfolio. Consider enlisting the help of a financial adviser if you don't feel confident enough in your decision-making skills during times of crisis, and don't get spooked by routine short-term fluctuations.

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3. Market downturns are great times to buy

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Go shopping -- for stocks at cheap prices!

On those days when the stock market takes a beating, don't think about what you're losing. Instead, focus on what you could be buying. A market plunge or "correction" makes stocks cheaper.

Don't be afraid of taking on new investments whenever the overall market goes into the tank. But that doesn't mean you should go all-in on any one stock, Professor Lee warns.

A better approach is to hold a well-diversified portfolio, favoring ETFs, so you're protected when stock market volatility comes to bear.

There are several robo advisors that automatically adjust your investments in the face of changing market conditions, and focus primarily on investing in low-cost ETFs to maximize your portfolio's diversity.

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

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About the Author

Doug Whiteman

Doug Whiteman

Former Editor-in-Chief

Doug Whiteman was formerly the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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