One more crash of the stock market is coming. It’s not hyperbole. The stock market is projected to crash. Since 1950, this S&P 500 On 38 occasions – crashes once every 1.84 years or loses at least 10% of its value. So you can be sure that it will happen again.
The unexpected part of the stock market crash is time. It is impossible to know when stocks will tank or how long the bear market will last. But regardless of when it happens, a market crash is not something to lose sleep. It is here that you should not panic that the market will sink next time.
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1. You will only lose money if you sell.
Technically, your net worth increases and the stock market comes up. But you only lose money if you sell at a loss. As long as you have invested with a horizon of five years or more, i.e. you have not invested in the stock market which you will need for at least five years, there is no need to worry. There is plenty of time to recover your investments.
It doesn’t matter how much value your portfolio has on any given day. It is a long-term operation that counts. Don’t cash in when everyone is panicking and you’ll be fine.
2. The best days of the stock market always follow the worst ones.
If it were possible to determine the exact timing of the market, of course everyone would do it. But, for those who lack mental strength, the best strategy is to keep it in the stock market, knowing history tells us that some great days are ahead.
The JPMorgan analysis found that 6 of the 10 best days between 1999 and 2018 for the S&P 500 index came within two weeks of the 10 worst days. It costs a lot when you don’t invest in those good days. With those 10 best days on the market missing in 30 years, the annual return on an estimated 10,000 10,000 investment would have dropped from 5.62% to 2.01%, reducing the value of the portfolio by almost half.
3. It is an opportunity to buy more.
If you like to sell deals when you buy, why not invest in stocks when they are on sale? Granted, investors often think that when stocks fall they will seize the opportunity – but fail to do so because throwing money into a plunge market is scary.
But if you believe a company will be successful in the long run, a crash is a golden opportunity to cut more shares cheaply. Plus if you invest by buying more shares in dividend paying stocks, you will naturally buy more dividends that you can reinvest in a company you trust.
A. Recovery A is inevitable.
Whether the recovery will be V-shaped or U-shaped or W-shaped is debatable. But it is very clear that recovery is possible. It will not happen as fast as you want.
All of these stock market crashes have occurred since the 1950s. Prolonged recessions, such as the Great Depression, which lasted from December 2007 to June 2009, when someone is probably weak in your memory, it is important to remember that most improvements are relatively short – an average of six months.
5. You know it’s coming, so you can prepare.
Because you know another crash is inevitable, be careful when it happens. Focus on stockpiling cash for at least six months in an emergency fund. This ensures that you do not have to reduce your investment due to short-term cash shortages. If you are well prepared for emergencies, consider investing more money so you can lock in lower stock prices.
Another smart move is to review your risk tolerance while the stock market is still strong. If you choose to balance your allocation to be more aggressive or conservative, it’s best to do so while you can still get the top dollar on your investments – plus you won’t have to make emotional decisions when the market crashes.
If you have a short term mindset then market crash is very scary. But true investors focus on companies they will want to own for years to come, even if not forever. If you stay focused on your long-term goals, there is no reason to fear a stock market crash.
