What To Do When The Stock Market Crashes
I do not know how long the economic slowdown will last, the overall effects of the recent events on our health or economy, or when the stock markets will bottom.
Many factors are in play, leading to the sharp market declines, not just the recent news events, so patience is required. The major US Indices are more than 20% off their highs today. However, the bad times may prove to be only temporary. When the market potentially recovers, the question will be, What have you done today to prepare for tomorrow? We all know the ‘waiting on the sidelines’ strategy is an epic failure, so good luck timing the market.
“May you have the hindsight to know where you’ve been, the foresight to know where you are going, and the insight to know when you have gone too far.” — Irish Proverb
What Can You Do?
Do not panic
Review your budget/cash flow.
Review your asset allocation and ensure it aligns with your goals, risk tolerance, and time horizon.
Ensure your dividends are reinvested, not just swept to a money market account.
If you contribute monthly to your 401 (k) / IRA and the guidelines permit, consider increasing your contribution.
If you save for college through a 529 plan for your child or grandchild, contribute.
If you have extra money, consider adding to a brokerage account or starting one.
If you do not have a retirement account, such as an IRA or 401 (K), consider starting one today.
In my opinion, this downturn does not compare to the collapse of Lehman Brothers or a GM bailout in 2008, but to be clear, I do not know what the future holds. Can we go lower? Yes! How much lower? I do not know. But I have faith in people, America, and the world that this too will pass, and when it does, I hope you and your family are better off.