Stock market crash
It is scary times right now, especially for those of us in Seattle: the epicenter of the US COVID-19 or coronavirus outbreak. Schools are closed for at least six weeks (along with the structure, meals, and day care that schools typically provide), offices are closed, and events are canceled. Local artists, service and gig economy workers are already feeling the economic pain.
In addition, fears of the impact of coronavirus have contributed to a dramatic fall in financial markets. March 12, 2020 saw the greatest loss (almost 10%) in the Dow Jones Industrial Average since 1987.
What SHould I Do During the Stock Market Crash?
Does it mean it is time to sell all your stocks and put your cash under your bed? History suggests it does not. The stock market has a long history of crashes and bear markets, a period in which the major stock indexes drop by 20% or more from a recent high point and remain that low for at least a few months. Yet, over the last century, the average return is 10%, before inflation.
So, what should a sustainable investor do in times of COVID-19? The answer depends mainly on:
- Your investment time horizon. If you are looking at a multi-year time horizon for when you need to access your investment, keep your money in the stock market and keep contributing to your 401(k). According to historical precedent, the stock market will eventually recover.
- Your risk tolerance and worry levels. If the worry of living in the times of COVID-19 and stock market volatility is too much, it’s okay to sell your stocks and put your money in relatively “safer” assets. One option is to put money into a sustainable bank savings account or certificate of deposit.
- Your current financial situation, research findings, and comfort levels. No one, not even Warren Buffet, can predict the shorter term future of the stock market. Do what feels right for you.