Stock Market Crash: What to Do (and What to Avoid)

The stock market crashed on Monday😨. You’re probably wondering how to respond. Here’s exactly what to do and what to avoid.

First off, what exactly happened?

Three major stock market indexes fell: the Dow dropped 1,034 points (2.6%), Nasdaq fell 3.4%, and the S&P 500 dropped 3%. This was the biggest one day drop in two years. Japan’s stock market experienced the worst decline since 1987, with a 12.4% drop. 

The losses came after news of lackluster job reports and fear of AI stocks not turning profits as anticipated.

Stock Market Crash: What to Do

Your best next move with the news of the stock market crash is to do nothing. This is from the buy and hold investing strategy, a passive investing theory. When you buy an investment, you want to hold, or keep the investment for the long-term, regardless of fluctuations in the market.

Investing is for the long run. Keep your investment for 10, 20, 30, or more years, regardless of temporary declines.

Famous investor Warren Buffett is an advocate of the buy and hold strategy and he went as far as saying, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Historically when you invest long-term the stock market earns on average 10%.

Even with recent losses the market is up 9% year to date and up 77% over the last five years.

Fidelity did a famous survey to find out what investors did the best and the results were stunning. They found dead people (and people who forgot about their account) portfolios performed the best.

Inaction can lead to higher long-term returns. Buffett also said, “Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.”

Stock Market Crash: What to Avoid

With the stock market crash avoid panic selling.

If the value of an investment declines, it’s human nature to panic and sense fear. People react based on their emotions and sell the investment to try to avoid further losses.

The truth is, if you sell your investment when the value temporarily declines, you take a loss.

Another investment strategy is to buy low and sell high. You want to buy an investment when the value is low and sell when the value rises.

Selling your investment when the value declines is the opposite of this strategy. You’re selling low and locking in the loss!

If a stock’s value goes down, consider buying more of the stock.

Think of the stock market decline as getting a blue light special.

Imagine you’re saving up to buy a new set of furniture for your living room. You have the money saved and coincidently it goes on sale. It’s now 20% off. Would you freak out and not buy the furniture? No way Jose. You’d be even more confident in your purchase and feel like you got a deal.

In summary, if you’re wondering what do with the stock market crash: do nothing and avoid panic selling your investment!

❤️ Carly

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