Many people ask themselves how to react to a stock market crash? Especially during periods like these, it is important to stick to your investment plan. If the stock market crashes, people start to question themselves and their financial decisions.
The stock market is your friend. Just like anyone else, it has highs and lows. The highs will always come back, it may just take a while. That’s why it is important to get over your fear of the stock market and start investing. When you experience the mindset shift of investing for the long-term and not looking at the temporary volatility, you’re winning.
There are a couple of important rules of thumb that I want to share with you: – Invest money that you don’t need short-term – Time in the market beats timing the market How should you react when there’s a stock market crash? Should you sell your stocks? We’ll dive straight into it!
When you’re investing your money, that means you’re putting money away in the market today so that you have more money later. If you expect to need money in the short term, you don’t invest it in the stock market but you start building your emergency fund. Money that you don’t need in the short term you can invest.We’ll dive straight into it!
When you’re young and you don’t need the money you’re investing any time soon, you can take a little more risk. Your working income will cover your costs, so that money can be used to cover your monthly bills. This means that when you’re young, you can invest most of your money in stocks. You are not touching the stocks until 20+ years down the road. At that time, your stocks will be worth a whole lot more.
The fact that a market correction will occur is certain. The thing is, no one knows when it will happen or how much the correction will be. Time in the market beats timing the market! Trying to time the market is such outdated financial advice. If you missed the best 10 days of the stock market between 2004 and 2019, your return will be an average of 4.11% instead of an average of 9%.