March 25, 2023

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Stock Market Crash Survival Guide

Stock Market Crash Survival Guide: 7 Ways to React When the Market Takes a Dive


A stock market crash is a sudden and dramatic decline in stock prices. It can be caused by a variety of factors, including economic recessions, market speculation, and the failure of individual companies.

When the stock market crashes, it can be a scary and stressful time for investors. However, there are several things you can do to protect your investments and even potentially come out ahead in the long run.

Below we’ll be covering 7 important things to consider when the stock market is taking a dive and how you can get through a stock market crash.

Do Not Panic

It’s important to remember that stock market crashes are a normal part of investing. While it can be tempting to panic and sell all of your stocks, this is often the worst thing you can do.

Instead, try to remain calm and focus on your long-term financial goals. If you’re investing in stocks in the Dow 30 or ETF’s like SPY, you will have nothing to worry about in the long term.

Don’t Sell Everything

While it may be tempting to sell all of your stocks when the market crashes, this is not necessarily the best strategy. Instead, try to take a more measured approach.

If you have a diversified portfolio with a mix of stocks, bonds, and other assets, consider selling only those stocks that are under-performing, that are more speculative or that you no longer believe in.

Look for Buying Opportunities

A stock market crash can present a buying opportunity for long-term investors. Actually, it is arguably the best time to be loading up on your favorite stock positions.

When prices are low, it can be a good time to buy high-quality stocks at a discount. Just be sure to do your research and only buy stocks that you believe have long-term potential or fit your investing strategy.

As these stocks continue to fall, you can continue to average down the price of your position, setting you up for an ideal situation and great portfolio growth when the market finally recovers.

Review Your Portfolio

A stock market crash is a good time to review your portfolio and make sure you are still on track to meet your long-term financial goals. Consider whether your current portfolio is still in line with your risk tolerance and investment objectives. If not, consider making changes to bring it back in line.

Consider Seeking Professional Advice

If you are uncertain about what to do during a stock market crash, consider seeking the advice of a financial advisor or professional investor. They can help you make informed decisions about your investments and provide guidance on how to weather the storm.

They’re also great for keeping up with the current state of the market as well as forecasting what could be ahead. This allows you to make wiser and more informed decisions with your portfolio.

Do Not Try to Time the Market

It is generally not a good idea to try to time the stock market. No one can predict exactly when a crash will occur, or when the bottom of a crash has occurred.

Trying to time any sort of market crash or move is one of the most risky things you can do in regards to the stock market. Nothing in the stock market is ever certain. Instead, focus on building a diversified portfolio and sticking with it for the long term.

Remember That it’s Only Temporary

While it may feel like the end of the world when the stock market crashes, it is important to remember that it is only temporary. Stock markets have a history of eventually recovering and even surpassing their previous highs. Matter of fact, here’s a historical look at the S&P 500 dating back to before 2008.

Historical S&P 500 Chart by Finasko
Historical S&P 500 Chart by Finasko

As you can see, with every crash or new low, a large rally and surpassing of the previous market high eventually occurs. By staying the course and maintaining a long-term perspective, you can weather the storm and come out ahead in the long run.

Preparing for the Next Market Crash

No one can predict when the stock market will crash next, but preparing for it and investing like you’re ready for one will keep you ahead of the curve. Implementing even a couple of the strategies and mindsets above will do wonders when you’re faced with the possibility of the next stock market crash.