It has been almost a year since the stock market had one of its biggest crashes in history. Who can honestly say that they at least felt a little panicked when it seemed like a third of their wealth had just disappeared?
If you think another accident is coming, you’re right. The stock market has undergone 38 corrections since 1950. Here are five reasons to not worry anymore.
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1. You want to invest when others panic.
If you put $ 10,000 in the S&P 500 Index on March 23, 2020, when the index peaked, you would have more than $ 17,500 today. Of course, you should not count on being able to determine when stocks will reach their low point. 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. It should still be stocks that meet your investment thesis and that you want to own, even if the market does not hold. But if they meet the criteria, the next accident is an opportunity to buy at a bargain price.
2. If you do not sell, the losses will be temporary.
The easiest way to avoid losing money during an accident: Do not sell during an accident. If you can afford to give your investments time to recover, the losses you have suffered will largely disappear. Of course, some fragile companies will not survive a bear market. Instead of worrying about the next crash, take the time to research your portfolio and sell everything you do not want to keep in the long run.
A bad day often means that the best days lie ahead.
If the market just drops, chances are some good days are going to happen. Between January 3, 2000 and April 19, 2020, seven of the ten best days on the stock market took place within two weeks of the worst days. Five of the best days took place within one week after the worst days.
Many experts predict this past spring that the stock market could take years to recover its losses. In fact, the S&P 500 index took just 126 days to recover after hitting a discount on March 23rd. The stock market’s best day in 2020 was March 24, when the S&P 500 climbed 9.38%. The Dow Jones industrial average also made its biggest profit since 1933 that day. This does not mean that every recovery will be so fast. But an accident does not mean that your investments will be in the landfill for years to come.
4. You can still make money from the dividend shares.
Even if the stock prices are stumbling, your return will not necessarily be negative or zero. Investing in dividend stocks can help you generate returns, even during an accident. Dividends, of course, are never guaranteed. But the Dividend Kings have increased their dividends for 50 or more consecutive years. Dividend Aristocrats have at least a 25-year record of dividend increases. Investing in companies with a long history of increasing their payouts annually, even during prolonged downturns, can give you peace of mind.
5. The market has finally always recovered.
History tells us why you should not sleep due to a stock market crash: your chance of investing in the S&P 500 is 73% in any given year. In five years your chance is 87%. The chance is more than ten years 94%. And the S&P 500 returns over a 20-year period have always been positive.
Recoveries do not always happen as fast as you would like. But just as you can trust that the stock market will crash again, you can also count on it to bounce back eventually.