IInvesting when the market is tough can be daunting. The S&P500 has hovered around bear market territory, falling more than 14% since its peak in early January.
Although stock prices have rebounded somewhat in recent weeks, many investors are still concerned that a crash is looming. And with all the uncertainty currently reigning in the world, it is possible that stock prices will fall further.
To be clear, no one knows for sure what will happen with the market. But there are a few reasons why I’m not concerned about a possible stock market crash, and neither should you be.
1. You won’t lose anything unless you sell
When stock prices fall, it can be scary to see the value of your portfolio drop. But no matter how much the prices drop, you won’t lose anything unless you sell your investments and withdraw your money from the market.
Losing value is not the same as losing money. Your investments will likely lose value if the market crashes because your stocks aren’t worth as much when prices are lower. However, when stock prices rebound, your portfolio will increase in value again. If you simply keep your investments during this period, you will not have lost anything.
Holding your shares is therefore essential to surviving a downturn. It’s not always easy to keep your money in the market when stock prices are down, but this strategy can better protect your savings in the event of a crash.
2. The market will eventually rebound
The stock market has a long history of recovering from even the worst downturns. In fact, it not only rebounded from the crashes, it also posted positive average returns over the long term.
Investing is a long-term strategy, and it doesn’t matter what the market does over the next few days, weeks, or even months. What really matters is its performance over the years and decades. And historically, it has worked well over the long term.
3. The right investments can protect your portfolio
Not all stocks are able to survive a crash, but the strongest investments are the most likely to rebound. It is therefore essential that each stock in your portfolio is a solid long-term investment.
Sound companies make solid stocks. These organizations will have the strongest fundamentals, including a capable management team, strong finances, and a competitive advantage in the industry. All of these factors give these companies an edge during market downturns.
When your portfolio is filled with stocks of these types of companies, there’s a much better chance that your investments will survive even the worst crashes.
Investing during periods of volatility is not easy, but keep in mind that downturns are normal. No one knows what the future holds for the market, but it will get better eventually. By choosing the right investments and holding them for the long term, you can have peace of mind knowing that you are as prepared as possible.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.