The recent dip in the stock market is hard to ignore: its scary to think that it could be a sign of something bigger. It can turn your stomach over if you already have a large chunk of your retirement invested or if your're about to dip your toes into the pond. Either way, it's hard not to hover your mouse over the "Sell" button everytime it happens.

I've been interested in the psychology behind this anxiety. I found an interesting discussion about how the media can add to the hysteria, thus sending people logging into their E*Trade accounts. Like all stories in the media, they tend to paint a very simplistic narrative of an otherwise complicated issue:

"...There's a tendency to talk about the stock market like it's the home team, so that when the stock market's up we should all be out and celebrating; when it's down, this is bad news, we should all be dour and glum." -Dean Baker of the American Prospect from On The Media

Mr. Baker has a good point. The truth is (as he goes on to point out), that most americans do not have any money invested in the stock market. Not only that, but with rising personal debt and stagnant wages for the past twenty five years, there isn't much cash left to invest anywhere.

However, the most important thing Mr. Baker points out is quite simple: focus your attention on economic news, not market news. I asked myself when I was rushing to log into my Fidelity account, "Am I thinking of selling because everyone else is? (market news) or am I considering it based on hard economic data? (economic news)."

Baker uses a great example: the stock market crash of 1987. He mentions that if you read the news around the time leading up to the crash, there really isn't much bad economic news. In addition, the economy goes on to perform very well for the next couple of years.