What to do When the Stock Market Falls

When the stock market falls during the year, or the NASDAQ numbers do worse than expected, even the most stoic investors panic. They wonder whether or not the stocks will hit rock bottom and whether their money will be affected. It makes sense for people to wonder like that, especially if their money is at stake. 

You don’t have any control over the market, and the slightest hiccup can have you Googling sue my broker faster than you can click your fingers. The thing is, choosing to sue your broker may not be the best idea because not even your broker can control the market. Sure, it may seem like a logical response on paper, but realistically you need to consider how the market is going, where your money is laying, and whether there are external factors that are contributing to the fall of the stock market. Stocks are always a risky business, and if you are involved with your money on the line, then you’re going to need these tips as an investor to protect yourself from loss. Here is what you should do if the stock market starts to fall.

• Relax. This may sound like counterintuitive advice, but the first thing you should do is to stay cool and remember that downturns are normal. The stock market moves up and down and it doesn’t just go one way. You would have been warned of this when you first started investing, and if you weren’t, then yes you should see your broker for not giving you the information that you need. The thing is, the volatility of the market means expecting Upson downs is the best way to go. If things start to fall down, then as long as you are properly diversified with a portfolio of low-cost index funds, you shouldn’t fret about fluctuations. Remember, this is the norm and not the exception.
• Stop watching TV. It’s addictive, to be a part of the stock market and watching your money rise and fall. But it can be detrimental to your mental health. Turning off the news and no longer watching what happens with the market and trusting your investor broker is a good idea. They will be able to inform you of the ups and downs and they will be able to tell you whether you should be worrying or not over the phone. It may sound like funny advice, but staring at a news anchor who is panicking because his boss is telling him to on TV is not going to help you at the moment. In fact it’s going to be one of the worst things that you can do. We are all very much addicted to watching the ticker tape on the news when disasters happen, but you don’t have to keep doing it. Turn off the TV and give yourself your Peace of Mind back.
• Don’t be impulsive. It may be an instinct to you to immediately pull all of your money out of your investments and move them to safety, but if you know that you should expect ups and downs in the market then being impulsive probably isn’t the best course of action. Don’t let the media freak you out because if you do you will make more impulsive decisions. This is something that you want to avoid. Stock markets often outperform in the long term and it’s the long term that you want to hold on for. By rushing, you are going to end up in a worse position and impulsive actions are going to hurt your bottom line.
• Stick with the programme. What is your investment strategy? What have you got in place so far and what will you have in place in the future? This is a very good question to ask yourself because you really want to ensure that you are able to maintain this investment strategy as time goes on. Downturns are bad times to change horses. Sticking with your current investment strategy ensures that you are committed to when the market is up. It may take some time for the market to come back to normal again, but when you are in it for the long haul you can expect that to happen. It’s super easy for investors to want to sell their stocks and hold their cash, but market timing can be an exercise in frustration as much as it can for utility. The goal here is for you to stick with the programme and watch your investment grow. Don’t be scared away.

• Know what you currently own. You want to ensure that when the market is up, you check your brokerage balance. When the market turns it’s natural to tune it out but you shouldn’t. Yes the market will turn and it’s normal but don’t bury your head in the sand about it. Know what you currently own even if you don’t want to see the value of your current holdings. You need to know where you are invested in and how risky your holdings are, and it is also important for you to know whether or not this is how you want to be positioned in this market.
• Take a look at your asset allocation. Almost all of the experts out there will agree that what’s in your portfolio has a lot to do with what you’ll get out of it. Those who go all in on NASDAQ when it’s growth heavy during the pandemic boom will be suffering for that now as things crash. If you haven’t checked in with your portfolio recently, it’s time now to revisit your holdings and open your eyes about the situation. Remember, burying your head in the sand is never a good idea.
• Talk to your broker about rebalancing your current portfolio. Assuming that you have a good asset allocation strategy in place and a financial plan, a downturn is a good time to review the allocation as well as the re-balances. Whether you are buying and selling holdings to get things back to where they should be, or adjusting ongoing contributions to your 401K, you’ll be able to review your entire portfolio as a whole and that includes your taxable accounts. Even the experienced investors among you can forget to rebalance the portfolio. This is not something you should be forgetting, and your broker should be calling you to get you to do that as soon as possible.
• Meet with your broker or your financial advisor. Remember when we said you shouldn’t sue your broker, hold off until you know whether they are at fault and have given you bad financial advice. If that is the case, it makes sense that you would want some kind of retribution here because you would have been the person to lose out. Meet with them, talk over your current assets and get to know whether or not there is actually a problem. Just because the market falls doesn’t mean you necessarily are out of pocket. And you don’t want to be too rash in your decision-making.
• Make sure that you have cash in your portfolio. Inflation is still very high right now in fact it’s been high for about 40 years. You want to ensure that you have cash in your portfolio so that you don’t lose any further value. Cash is an important part of any good investment strategy, it’s not just about Moving money here and there. You should always have a cash position in your portfolio and your financial advisor should be the one telling you that. If they are not, then you need to find a new advisor. Cash doesn’t necessarily pay well, but it does help you to lower your risk and it does allow you to invest when there is a dip in the stock market. Most investors worry about inflation eating away at their cash, but when the inflation is 0, you don’t have to worry about losing that purchasing power overtime. Again, speak with your financial advisor if you are confused or concerned about any of this.
• Self-education goes a very long way. When you’re up to speed on the stock market, the downs don’t seem as frightening. Before you start to panic, learn about what happened before. When you become more familiar with the risks associated with being in the stock market, they do seem a lot less scary than they used to. Utilizing a stock market analysis tool can further enhance your understanding by offering real-time data and historical comparisons. These tools can help you spot patterns and trends that may not be obvious at first glance. With both knowledge and the right tools, you can approach market fluctuations with greater confidence.
• Pick up some books on investment strategies. As part of your self-education plan, you should be looking at books on investment strategies and wealth. This will help you to build the right strategy and you don’t actually have to go alone either. Don’t be afraid to look around for the right books because if you don’t know how the investments market works you’re going to panic. You should never limit your own investing education because all you will be doing is hurting yourself in the long run.