When your portfolio suffers losses during a tough market period, you might be tempted to throw in the towel or make less-than-advised purchases in hopes of realizing a windfall of short-term returns. In this segment of Backstage pass recorded on January 26Fool contributors Rachel Warren, Connor Allen and Jason Hall talk about the importance of maintaining a long-term investing mindset.

Rachel Warren: We had a comment from Vihaan on this point. He said, I believe, a quote from Peter Lynch about avoiding losses, “Much more money has been lost by investors preparing for corrections or trying to anticipate corrections than was lost in the corrections themselves.” Vihaan says he thinks it’s questionable that he saw his portfolio drop 40% in two months. I wonder if any of you have a comment on that?

Connor Allen: Mine too. Mine dropped 40% in a little over two months probably too and that thing is, go for it, Jason.

Jason Hall: Go ahead. No, go ahead, please.

Connor Allen: Okay. Mine dropped 40% in two months, but the thing is, Vihaan, I’m not looking at a two-month horizon, I’m looking at a five-year horizon. So I started investing in 2018 and I was looking at my portfolio, and I was like, “Man, I should have just.”

What a lot of people would have thought is that I should just put my money in the S&P500but I actually went back and looked and started with Motley Fool Stock Advisors my senior year of high school, that’s when I started investing.

In fact, I’ve looked at the performance of my portfolio over its lifetime, and I’m still beating the S&P500 since 2018, even though I’m experiencing a 40% loss in the last few months. This is how you should see it. You can’t see it on these month-by-month bases.

Rachel Warren: Impressive.

Jason Hall: Here’s what I wanted to share, and that’s what will prove what Mr. Lynch said and what other investors have talked about, David Gardner talked about not being a bear market hero, it’s here . Vihaan, I smell you, portfolio down 40%. Connor, I feel for you. I’m down again because I built that bar so I have a lot of dividend stocks that helped. Real estate investment stocks that helped absorb some of those losses.

But that’s the coronavirus crash, from February 19 to March 23, 2020. So 33.8% loss in total return. If you just look at the level, it was a 35% drop.

Just imagine being the person who sold everything somewhere around here, anticipating that every other major stock market crash we’ve had, it will take years for the market to fully recover, only for that to happen.

So you lock in that 35% loss, and I’m going to change that, only to see from the bottom, the market is back to a double. It was with the sale that we had. This is the number Peter Lynch is talking about.

Rachel Warren: It’s that long-term horizon.

Jason Hall: Missing out on gains to avoid losses, 40% in two months my friend sucks. It sucks, doesn’t it, Connor? It’s painful.

Rachel Warren: It sucks. I’ve lost 20% in the last few months, so less severe, but I still feel your pain, Vihaan.

Jason Hall: Yeah. I mean, that’s the thing. I have a good semi-retired friend who did very well, he saw his portfolio drop by more than 30% at the beginning of the year, that represents for him approximately 2 million dollars. [laughs]

Rachel Warren: wow. [laughs]

Jason Hall: [laughs] But they retired with enough money and a sufficient margin of safety.

Rachel Warren: Yeah.

Jason Hall: That’s OK. Because he is someone who is still investing for 20 years and who has a sufficient margin of safety. All that to say that 40% in two months sucks.

Focus on the two months, focus on your goals. I guess your goals for that money weren’t three months away. [laughs] It’s not short term money, it’s hopefully three years, five years, more than 10 years. If you have wonderful businesses, enough of them, you’ll be fine.

Connor Allen: There was a big call to Dave Ramsey, that was a few years ago, and a lady calls and says, well, I sold everything before the crash of 2008 because I was worried about it and my financial advisors told me to care.

He said, “Well, that’s great. Did you get your money back?” She said, “No, never, but I missed all the stock market crashes. It was awesome.” That call was in 2015, and in 2015, if it had stayed on the market through 2008, it would have been fantastic. It just goes to show that anticipating accidents like what Peter Lynch says, I believe it to be true.

Rachel Warren: Well, here’s the thing I always remember. The stock market has crashed every year for the past 50 years. It’s just a snapshot. On average, there is a correction approximately every two years.

But what always helps me when I look back whenever there’s been a crash or correction, the stock market not only rebounded, it rallied beyond where it was before this crash in most cases, if not all.

I think that’s something that for me, personally, as a new investor, looking back at this period we’re in is a great reminder of why I keep my eyes on price and why my goals are not not t for even a year from now or two years from now, but five, 10, 15 years or more.

I’m a long way from retirement, so my time horizon might be very different than someone else’s. But this is where I think everyone’s personal investment philosophy and how you build your portfolio should be informed by your goals, where you are in life, when you plan to retire, etc. But thank you both for sharing your thoughts on this. , and I hope that answers your question, Vihaan.