How to Deal with a Stock Market Crash

0K Views
by Megan Fourhman Updated on April 26, 2020
Disclosure: We’re letting you know that this post contains sponsored links which The Smart Wallet receives compensation for, which may impact their order of appearance. This site doesn’t include all available offers.

The stock market can make you a millionaire or send you into the red… or both! The stock market is ever-changing, so the status of your investment is always changing.

While you may be familiar with the normal ups and downs of the stock market, nothing could prepare you for the most recent stock market crash. In the wake of the coronavirus pandemic, the stock market has experienced more turmoil than most stockholders have ever seen, leading to widespread panic.

Instead of panicking, use these tips to ride out the stock market crash and improve your investments along the way. Stock market crashes happen; but your losses don’t have to!

Don’t Panic- Declines are Inevitable

Stock market declines are inevitable. It’s as simple as that. Panicking only makes a tricky situation worse, and your emotions may lock in losses that are otherwise preventable.

So when you see your stock values plummeting, remind yourself that it’s happened before and it will happen again. Review the long-term trends of your stocks to remind yourself that, although volatility in the short-term is unnerving, there’s promise in the future.

Consider Buying and Diversifying

If you’re an opportunist, you may view a stock market crash as the perfect opportunity to do some bargain shopping. It’s true! When the market crashes, you can afford to purchase shares of stocks that may otherwise be out of your reach. Or you can buy more shares of your favorite stocks to increase your payout in the future.

When the stock market finally recovers, your profits will soar. This is especially true if you take the time to diversify. Consider these diversification tips:

  • Invest in a mix of mutual funds
  • Invest in a variety of company sizes and types
  • Invest in international stocks
  • Select a blend of aggressive and safe investments

Diversifying ensures that you never have all of your eggs in one basket. Even if the worst case scenario occurs and one of your stocks never recovers, you still have a diverse range of investments to rely upon.

Get a Second Opinion

It never hurts to get a second opinion and use a second set of eyes to evaluate your investment situation.

It’s easier than ever to get a second opinion thanks to financial apps like Stash that do all the work for you. The Stash app is designed to help you manage your money, build your wealth, and learn as you go. Unlike other programs that require hefty minimum balances, Stash lets you start with as little as $5 to open flexible investing and retirement accounts.

Choose from three subscription plans:

  • $1/Month: Basic brokerage account and Stash Banking account with free financial guidance
  • $3/Month: Brokerage account plus retirement investing, taxable brokerage account, and other banking options
  • $9/Month: All the above plus two custodial investment accounts for children

Once you choose a subscription, Stash will ask you questions and use your answers to show investment options aligned with your risk tolerance and savings goals. You don’t have to worry about understanding ticker symbols and ETF names because Stash uses themes and layman’s terms to make investing simple.

Overall, a stock market crash doesn’t have to spell doom. Remain patient and optimistic while taking advantage of the opportunities that a crash does provide.

See Also: Stocks vs Bonds Explained