My takeaways during a stock market crash:
- Focus on long term investment. Do not sell stocks at low in a market crash because of temporary loss.
- Continue saving and investing even during a downturn. Automating investment would help you being disciplined in investing.
- Review accounts monthly or quarterly is enough. Avoid anxiety by not logging investment accounts too often.
Lesson #1: Don’t Sell Stocks During a Market Crash! Avoid emotional investing.
Doing nothing can be the most important move during a market downturn.
Selling low is a mistake. 😨
It’s natural to fear losing the value of your assets when the market drops. True, stock values may take a hit in the short term, but they often recover over time. When you sell at a low, you turn a temporary dip into a permanent loss.
Example: The S&P 500 Index
Imagine you invested $100 at the beginning of 2022:
- By the end of 2022, your investment would be worth $86 (-14%).
- By July 2024, that investment could grow to $125 (+25%).
Which would you prefer?
Would you take $86 in cash for peace of mind, or wait it out and let your investment bounce back?
Lesson #2: Being disciplined in investing. Continue doing what you usually do (for investing & saving).
Regardless of the market crash, you should continue saving and investing your money.
Like I mentioned above, shielding yourself from the bad news (aka. Ignoring it 🫣) could be beneficial. However, it is not always easy to control our emotions like a robot. I found few things are helpful:
- Automating your investment and saving.
Let it run in the background. So that you don’t feel hesitant to invest or invest too much* in a market downturn.
Additional reading – Hassle free saving for 401k savings
Note: I agree. You can buy more shares with the same money during a downturn. However, My philosophy is always investing incrementally to spread risks over time. - Avoid logging in to your investment account too often.
That causes unnecessary anxiety. When I have no mobile app installed on my phone, I log in to my account less frequently. Therefore, I am less emotional about my investment.
