When the Stock Market Is CRASHING… What Should You Do?!?!?

Do nothing. Stay the course.

**End of post!** 🤣

Just kidding. My editor won’t let me publish a 5-word post (even though “do nothing” really is the simplest answer to the question), so I’d better add some color commentary…

When the stock market is crashing —> you should do nothing.

I suspect that many of you already know this. But, even though you know it, you might still be thinking in the back of your head, “Maybe this “crash” is different from ones in the past? I’m more experienced now, so maybe I can make some small changes to limit my downside? My portfolio is different from other people’s, so I am allowed to rebalance a little bit… It’s not like I’m selling ALL my stuff, maybe I’ll just sell a few stocks and buy them back at a lower price later?”

It’s not bad to be thinking these thoughts (I think them, too). It’s human nature to try to actively solve problems when we foresee shit hitting the fan.

But, history tells us that the more human intervention your portfolio has, the more money you lose. Even if your adjustments are made with brilliant research and good intentions, they have a higher chance of negatively impacting your overall performance.

Other Thoughts About Stock Market Crashes…

In no particular order, here are some other notes and stories on this subject:

It’s a good time to “play dead”: Fidelity did a 10-year study of all its client accounts from 2003 to 2013. Do you know which investors had the BEST account performance? Dead people! (Or people who had “forgotten” about old accounts.) When accounts were left untouched, they had better growth. So don’t touch yours, mkay!?

When in doubt, LEARN: To fill the time while you are NOT touching your accounts, start reading and learning. I’m not talking about consuming panic news and social media. I’m talking about studying the good ol’ fashion fundamentals of building wealth. Read some of the top personal finance books that have stood the test of time. Or, check out some notable new books:

  • Right now I’m reading Trillions by Robin Wigglesworth. It’s about how index funds were created.
  • Check out Money Mastermind. This book is written by 30 of my fellow FIRE bloggers and influencers. Different topics, different perspectives, and I even wrote one of the chapters! BTW, if you do want this book, order with discount code “BUDGETS” for 30% off. (This ebook also has a 100% money back guarantee if you don’t like it! 🤫)

We are all in this together: During a market crash you might feel scared, alone, and poor. But the truth is that everyone is in the same boat as you – myself included! One of the reasons I publish my net worth each month is to show you that I practice what I preach. In a market crash, I will lose considerable value in my assets (I’ve lost more than $50k in the last 3 weeks alone). It might get worse, but I won’t be selling any investments. You are NOT alone in a crash.

This has happened before, and it will happen again: The stock market has experienced dozens of crashes and corrections over the decades, and it’s bounced back from every one of them. Since I’m only 37 years old, I will probably experience 5-10 more MAJOR crashes in my lifetime. Maybe even more. But, I will also experience an equal amount of MAJOR bull runs and heroic comebacks. As long as I stay invested, the growth will always be bigger than the crashes. I just need to ride everything out.

You can’t outsmart a crash: Sometimes people think they can use market crashes to their advantage. But, this rarely works out because nobody knows where the “bottom” of a crash actually is. In fact, even if you DID know when the exact market bottom was during every major crash over the past 40 years, you would still come out with less money investing at the bottom vs. investing consistently regardless of highs and lows. Read this easy-to-digest comparison from my buddy Jeremy at Personal Finance Club: How to time the market perfectly.

You won’t lose any real money, **unless you sell**: Even if stock prices plummet, you haven’t technically lost anything as long as you continue to hold your investments. You still own the same number of shares in the same companies, so keep holding them until value rises again (it will).

The “bright side” of sequence of returns risk: A multi-year market crash is one of the biggest risks to people who have just retired. BUT, a multi-year crash can actually be the best thing for people just starting their investment journey! As Big ERN puts it“Sequence of return risk is a symmetric risk: you can benefit from it or it can seriously harm your investment returns. It impacts both retirees and savers and the risk is exactly a zero-sum game.”  

“Please sir, can I have some more?” To add to the point above, a market crash means you can buy stocks at a discount. Downturns are actually a good thing for anyone who is consistently saving and investing (which is the majority of the population!). When you see stocks slipping, you should think like Oliver Twist… “Please sir, can I have some more?”

Learning from past mistakes: Talk to anyone who lived through the 2020 Covid crash, the 2008 Financial crisis, or the 2001 Dotcom crash… You’ll hear 2 main regrets from any investor during those times. Those regrets are 1) I wish I didn’t panic-sell when the market was crashing. And 2) I wish I bought MORE stock during the crash. Learn from other people’s mistakes!

It’s a great time to side hustle!: Speaking of buying more, market crashes are a great time to earn excess money —> and put that money into investments. Side hustles also distract you and keep you busy so you don’t freak out about what the market is doing.

Guided Meditation Video, by JL Collins: A few years back, legendary JL Collins made the following 10-minute video for anyone freaking out about the stock market dropping. Listen to his soothing voice, relax, and follow his wise advice!

(A Guided Meditation for When the Stock Market Is Dropping)

Last but not least…

My last piece of advice for what to do when the stock market is crashing… Keep living your awesome life. Hang with your kids, continue your hobbies, keep doing good deeds for people and spending money on the things that you love in this world. Just because the economy is doing weird stuff, it doesn’t mean you need to radically change your behavior. Spend your time on things within your control, not worrying about stuff you can’t.

Happy Friday, y’all! Have an awesome weekend. 😉

Love, Joel

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  1. SL January 28, 2022 at 10:56 AM

    Look, If you have a 401K or other portfolio you put the same amount of money to the same things every week… ESPECIALLY do nothing. That same amount of money is buy more shares than it did when everythings was going up, and when it goes up again, it wil go up faster since you have more shares than you would have.

    I didn’t move my 401K at work for that same reason and I gained Faster than I would have when it did go back up. Stay your course. If you are high risk close to retirement, you should push that retirement back, unless the market isa bbackup for you and you can let it ride..

    1. SL January 28, 2022 at 10:59 AM

      Wow, my typing is horrible today; apologies.. Sentiment still stands. Don’t panic, keep looking for the right vehicle for your risk appetite, Hey Joel “What is risk appetite?” may be a great article. *grin*

      1. Joel January 28, 2022 at 11:17 AM

        Cheers SL! In the meantime for anyone wondering: “Risk tolerance is a measure of how much of a loss an investor is willing to endure within their portfolio.”

        For me, I’m probably OK losing ~50% of my portfolio value (it would absolutely SUCK, but it wouldn’t completely derail my life — because I am young, still earning, and have the mental willpower to endure shit times).

        That being said, the tricky part for most people (myself included) is when theory turns into real life. I might *think* my risk tolerance is xxx, but if the worst case scenario actually happens, I might learn that I really am a weakling that can’t stomach it. I guess you become more in tune with your *real* risk tolerance over time, and most people become less risky the older they get.

  2. industrialbagels January 28, 2022 at 11:39 AM

    how are you replying at 11:am today when it’s still 8???

    1. Joel January 28, 2022 at 11:58 AM

      Great Scott!!! :) It’s probably because these website servers are hosted on the east coast and they are 3 hours ahead so that’s when/where the time stamps for comments.

  3. Olaf, the Mile High Finance Guy January 28, 2022 at 7:46 PM

    It would have been epic if you had published a 5 word post. A days work done, now off for the weekend. But as you said, DO NOTHING and STAY THE COURSE. That is all anyone should do if they are investing for the longterm. However, it is a bit painful though when your monthly losses eclipse your annual income, but it is a good problem to have!

    1. Joel January 28, 2022 at 7:56 PM

      True. But it’s only going to get worse later in life as the wealth pile grows. Having a 3M or 4M portfolio right now must be crazy with 100k swings week to week. Regardless, stay the course :). Have a great weekend buddy!

  4. Hilary January 29, 2022 at 11:20 AM

    How about someone with no investments and $5G’s + just sitting in a savings account? Should I go to Fidelity and set up a Roth IRA right now? Best to do it while the market is down right? Another site you recommend more? Any tips would be greatly appreciated!!! Thanks!

    From a snowy CT,

    1. Joel January 29, 2022 at 11:35 AM

      Hi Hilary! The sooner you start investing, the better. No matter what the market is doing, opening an account and starting to invest ASAP is Step #1. Then, keep adding month after month, no matter how little it seems. I’m proud of you for beginning!!

      Personally, I use Fidelity. Takes just a few minutes to open a Roth and you can start funding it right away.

      Not sure what your employer situation is, but investing in your 401k (if you have one) is another great way to start building wealth in the background. The more you put your investments on auto-pilot, the better. Set and forget!

      Great to hear you are starting your journey! Please let me know if you have any other questions, I’d love to help.

      PS. once the money goes in –> make sure you don’t pull it out! The market might crash further than is it right now. but that’s OK, because all you care about is looooong term :)

      1. Hilary January 29, 2022 at 11:46 AM

        OMG you are the best! Thanks for the quick reply. I, unfortunately, do not have a 401K option at work. Or health insurance, grumble grumble… I’m a massage therapist and make very good $ where I am but investments and health insurance are on me. But! I love organizing and tracking and numbers so I am super excited to get started. Heading to Fidelity as we speak! Your site and information are so valuable. Thanks for welcoming me to the finance world!


        1. Joel January 29, 2022 at 12:00 PM

          I don’t have 401k or health options from my workplace right now either. :( BUT, there are other cool options for us contractors which you can learn about over time.

          Glad you love tracking numbers and sheets and stuff! Good luck with fidelity :)

          1. Hilary January 29, 2022 at 3:14 PM

            Oh if you have any health insurance info – please share! I’ll need to find some in the coming months! Enjoy the weekend! I have lots of BAS posts to catch up on!

            1. SL January 31, 2022 at 8:40 AM

              There are several posts about starting out on BAS. I have been following it for years and have enjoyed and learned a lot from it