A stock market crash is a rapid and often unanticipated drop in stock prices. When the stock market crashes, the total value of investments decreases, meaning that the market value of investments has changed, but the same number of shares are still owned. Investors who sell their positions during a crash can lose money, but if they wait it out, there is a good chance they will eventually recoup the loss when the market rebounds. Here are some things to do when the stock market crashes:
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Stay calm: Managing emotions during market crashes is imperative. Avoid checking your portfolio too often and stick to your long-term strategy.
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Know what you own: Understand the companies you have invested in and why you invested in them. A fear-driven reaction to a temporary slump isnt a good reason to sell.
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Diversify: By placing your investments on the market as a whole, youll be giving yourself the best chance to build wealth, and youll also be in a position to recover from market crashes sooner when they inevitably occur.
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Buy more stocks: If you have the cash when the market hits bottom, you’ll be in a position to get the biggest benefit from the market recovery that’s sure to follow.
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Invest for the long term: The stock market is volatile, and it is important to invest for the long term. If you have a long investment timeline and are properly diversified, it’s often best to ride out the downturns.
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Prepare for a crash: Understand that a crash could happen and plan for it. This means having an emergency fund, diversifying your investments, and avoiding buying on margin.
It is important to note that stock market crashes are not that common, and the market will recover eventually.
