Stock Market is in a Free Fall: What Should You Do?

In case you haven’t noticed, the stock market has retreated considerably in the last week and today it’s getting even worse.  Wall Street plummeted early today with the Dow falling more than 1000 points as traders aggressively sold stocks and bid-up only the safest asset classes.   The market is set to have one of it’s biggest declines in years.   But I’m here to help advise you on what to do.  No, I’m not here to tell you what to do.  Simply to advise.

Rule #1 – Do NOT panic if you are a long term investor – Just because the market is declining does NOT mean you should be freaking out and selling all of your stocks.   If you are a long term investor this might even be a great buying opportunity for you.   Markets fluctuate and markets have seen declines considerably worse than this.  And in the entire history of the stock market if you had sold all your stock during market declines you would have missed out on a tremendous financial opportunity as well as lost a ton of money.   If you have a long enough time horizon chances are you will be more than OK.  In fact you’re buying stocks at a discount right now.  Remember, don’t panic.

Rule #2 – Act according to what your body is telling you.  Are you completely stressed out right now?  Have you lost sleep?  These are the times you’ve gonna listen to your gut and no one else.  If selling 100% of your stocks makes you sleep at night, then do it.  Obviously think before you do but your health and sanity comes first.  If you’re close to retirement and may lose 20% of your savings, you might consider selling some stock.  But again, if this doesn’t bother you……. If you’re in it for a long haul and aren’t worried?  Then why take action?  Act according to how YOU feel, not everyone else.

Rule #3 – Ignore the news and remember why you bought stocks in the first place –   You bought stocks because you thought you had a good chance to make money.  You invested in solid companies because well, they’re solid.  When the entire market is getting crushed, your great companies included, you have to ask yourself, “what’s changed?”  The market is very much dictated by emotion and the actions of the herd.  You must act without emotion.  Understand the companies you bought a week ago are the same companies today.  Unless something very specifically bad is going on with a company you bought then go back to work and ignore this.  Seriously ignore it.  Turn off the TV.  Stop reading crazy headlines.   Just get back to work.  Shut it off.

Other than these rules, there’s not much you can do because anything outside of these rules falls under things you shouldn’t be doing.  Things like over analyzing and trying to control things you frankly cannot.  What you can control is how you react.  You can control your own behavior and response.   Usually the best response?  Not responding.

Remember, get back to work and stop worrying about this!