It’s almost a year since the stock market had one of the biggest crashes in history. Who can honestly say that they did not at least feel a panic attack when it seemed that a third of their wealth had just disappeared?
If you think another crash is coming, you’re right. The stock market has undergone 38 corrections since 1950. Here are five reasons to stop worrying already.
You will invest when others panic.
If you had invested $ 10,000 in S&P 500 index on March 23, 2020, when the index hit bottom, you would have more than $ 17,500 today. Of course, do not rely on being able to determine the moment when stocks hit their lowest level. But the point is, a stock market crash can be a huge opportunity if you are prepared for it.
Instead of panicking about a market crash, make a list of stocks to buy during the next crash. They should still be stocks that meet your investment thesis and that you would like to own even if the market did not refuel. But if they meet these criteria, the next crash is an opportunity to buy for a good deal.
2. If you do not sell, the losses will be temporary.
The easiest way to avoid losing money in a crash: Do not sell during a crash. If you can afford to give your investment time to recover, the losses you have suffered will largely disappear. Sure, some fragile businesses do not survive a bear market. But instead of worrying about the next crash, take the time to give your portfolio a check and sell everything you do not want in the long run.
A bad day often means that the best days are ahead.
If the market just crashed, there are high odds that some good days are about to happen. Between January 3, 2000 and April 19, 2020, seven of the stock market’s 10 best days occurred within two weeks of the worst days. Five of the best days took place within a week of the worst days.
Lots of experts predicted last spring that the stock market could take years to recover its losses. In fact, the S&P 500 index took only 126 days to recover from the bottom on March 23rd. The stock market’s best day in 2020 was March 24, when the S&P 500 rose 9.38%. Dow Jones Industrial Average also the largest gain since 1933 that day. This does not mean that any recovery will be so fast. But a crash does not mean that your investments will be in the landfills in the coming years.
4. You can still make money on these dividend stocks.
Even if stock prices pummel, your return will not necessarily be negative or zero. Investing in dividend stocks can help you generate returns, even during a crash. Yield, of course, is never guaranteed. But the Dividend Kings have been increasing their dividends for 50 or more years in a row. Dividends Aristocrats have at least 25 years of experience with dividend increases. Investing in companies with a long history of increasing their payouts each year – even during prolonged downturns – can buy you peace of mind.
5. The market has always come last.
History tells us why you should not lose sleep due to a stock market crash: Your chances of profiting from investing in the S&P 500 are 73% in any given year. Over five years, your odds are 87%. Over 10 years, the odds are 94%. And the S&P 500 return over a 20-year inventory period has always been positive.
Recoveries do not always happen as fast as you would like. But just as you can trust that the stock market is going down again, you can also trust that it will eventually come back.