4 ways to thrive during a stock market downturn

Navigating the stock market's frequent ups and downs can be daunting, especially for those who are new to investing.

Plus, the media tends to sensationalize stark market drops which can make investing feel way more risky than it actually is….

On Monday August 5th, 2024, I received an urgent email to join Fox 5 news to talk about the what was happening in the stock market…

I saw headlines from other news outlets…

“Stock market crashes.”

“Global markets in panic.”

You know, things of that nature.

I wouldn’t quite call it any of that.

While yes, the landscape can often seem volatile and unpredictable, with the right strategies and knowledge, these fluctuations turn into just another day and sometimes an opportunity to invest even more.

Here’s how to stay resilient and proactive, even when the market seems against you.

1. Stay Consistent

Consistency is key in investing. Regular contributions to your investment accounts, regardless of market conditions, can reduce the impact of volatility on your overall portfolio.

There are 2 BIG mistakes people make when the stock market goes down:

The first is discontinuing investing during market downturns. Some of the best days in the market happen when the stock market is down. If you stay out of the market, you are missing out on an opportunity to grow your wealth.

The second big mistake is taking all your money out of the stock market. Knowing that the stock market has always returned to record highs, taking your money out when the market drops is one of the worst things you can do.

You’re essentially locking in your losses for good. Instead, hang tight and ride the wave back up.

2. Seize the Opportunity to Buy Low

When the stock market dips, many novice investors panic, fearing their investments are losing value. However, downturns can be the best times to invest.

Think of it as shopping during a sale—the prices of quality stocks are lower, allowing you to purchase more shares for the same amount of money.

This can be particularly advantageous for long-term investments in your 401(k) or IRA.

3. Diversify Your Investments

A common mistake among new investors is putting all their eggs in one basket.

If you're only invested in a single stock or sector, your portfolio's health is directly tied to its performance.

Diversifying your investments (putting your eggs in different basekts) helps mitigate risk.

Broad-based index funds (like an S&P 500 Index Fund or a Total Stock Market Index Fund), for instance, spread your investment across a wide range of assets, which can protect you from severe losses if one industry or company fails.

Review your portfolio to ensure it includes a healthy mix of stocks and bonds. If you are on the younger side, you should be holding more stocks because you have time to handle more fluctuations in the market.

If you’re approaching retirement, a larger holding on bonds could make sense to help weather any stock market drops closer to retirement.

4. Educate Yourself

Volatility in the stock market can be less intimidating when you understand its nature.

Use market downturns as an educational opportunity to learn more about economic cycles and investing principles.

Resources like financial podcasts, books, and online courses can enhance your understanding and demystify complex financial concepts.

Knowledge not only reduces fear but also empowers you to make informed decisions about your investments.

5. Focus on Long-Term Goals

Despite the market’s short-term volatility, historical data shows a positive trend over the long term.

For instance, the stock market has returned about 10.22% year-to-date (August 7th 2024), 15.70% over the past year, and an impressive 79.11% over the past five years.

Keeping your eyes on these long-term gains rather than the temporary fluctuations can guide your investment strategy more effectively.

Navigating the stock market as a beginner involves understanding its inherent fluctuations and the opportunities they provide.

By building basic investing knowledge, you can build a resilient investment portfolio that not only withstands the market’s fluctuations but also thrives.

Learning about the stock market will help you stay calm during these periods of turmoil.

If you want to learn more about about how to invest in the stock market, don’t miss my next free beginner investing workshop - LIVE. Learn more right here.