Of course the stock market crash is scary. This is because there are a lot of emotions involved in trading. When the value of your portfolio goes down the whole day and you lost many thousands of pounds, I guess it is natural to be fearful. However, this article will provide proof on what you need to do when markets crash, so as to deal with a crash as best as possible and maybe even come out with a great deal. So let’s get going
1. Do nothing
If you’re a long-term investor, the best thing you can do when the stock market crashes is nothing. Don’t make any rash investment decisions in a panic. The stock market will rise and fall, over short periods of time. What’s important to remember is that you need to be in it for the long haul. So don’t sell all your stocks because you’re afraid of losing money. Instead, keep calm and carry on with your investing plan as usual.
2. Do not panic sell
No matter how bad things get, if you sell all your stocks you’re guaranteed to lose money because the market will eventually bounce back. All stock markets have eventually turned a loss into a gain, so think long-term and focus on your goals. If it helps, remember that no one can predict when the stock market will crash or rise. So when something happens that’s beyond your control, don’t worry about it — just ride it out.
3. Buy more at the dip, if you can
The best time to buy stocks is when there’s blood in the streets — but of course, no one knows exactly when that is until after the fact. After a sharp decline in prices, people tend to run for their lives and sell low. If you have enough cash set aside for emergencies and are investing for long-term goals like retirement, then go for it.
4. Focus on the long term investment
Don’t let short-term market movements derail your long-term investing strategy. A sudden drop in the market shouldn’t change what you plan to do over the next 10, 20 or 30 years.
Make sure that some of your money is in more stable investments like bonds and mutual funds, which will help balance out any losses from stocks. If you look at 5-year rolling returns, average yearly returns over every 5-year period in U.S. history have been positive, with an average annual return of 10%.
5. Diversifying Income Portfolio
During a market slump, you might want to consider making extra investments. When the stock market is profitable for you, we recommend that you accumulate more and more assets. Even after the stock market crisis, having a steady stream of income provides financial stability.
If you have extra money available, you might want to consider making additional investments during a downturn in the market. Investing in real estate can be a great option as it provides steady cash flow along with capital appreciation over time.
“Don’t put all your eggs in one basket,” Warren Buffet once said, and we recommend that you do the same.