Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Is It Safer to Pull Your Money Out of the Stock Market Now or Stay Invested?

By Katie Brockman - Jul 9, 2021 at 5:30AM

Key Points

  • Stock market crashes are inevitable, and a downturn may be on the way.
  • Withdrawing your money may seem like a smart move, but it can be risky.
  • Regardless of when the market crashes, there are ways to protect your investments.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A stock market crash could be on the horizon. Is it time to sell your investments?

The stock market is known for its volatility, and that can be intimidating -- especially if you have your life savings tied up in your investments. While the S&P 500 has experienced a phenomenal year since the market bottomed out last spring, stock market crashes are inevitable. This upward trajectory can't last forever, and some experts believe another crash is right around the corner.

If a market downturn is looming, what should you do with your investments? Is it better to pull your money out of the market right now? Here's what you need to know.

Young person sitting at a desk looking at a notebook and calculator

Image source: Getty Images.

Timing the market is tough

On the surface, the best way to handle a market crash is to pull your money out of the market just before prices plummet, then reinvest when prices are at their lowest. This is called timing the market, and while it may seem like a smart strategy, it's harder than it looks.

The stock market is unpredictable, and even the experts don't know exactly when the market will crash or how long it will take to recover. Case in point: In the early stages of the COVID-19 pandemic, the S&P 500 lost roughly one-third of its value in a matter of weeks. While the crash itself was unprecedented, even more surprising was its almost instant recovery and continuous growth throughout the pandemic.

Nobody can predict when the market will crash, and if you sell your investments at the wrong time, it could be a costly mistake. If stock prices continue to rise after you sell, you'll miss out on that growth. Or if you wait too long to sell, you may end up selling your investments for less than you paid for them, locking in your losses.

What should you do to protect your money?

While it may seem counterintuitive, one of the best ways to protect your money from stock market crashes is to do nothing. By simply holding your investments, you can ride out the storm and let your money recover on its own. 

The key is to make sure you're putting your money behind solid investments. It doesn't matter whether you're investing in individual stocks, mutual funds, or ETFs -- if the investments have strong fundamentals and a healthy track record, they're more likely to survive market crashes.

This doesn't mean your investments won't experience volatility. If the market plummets, your investments will likely see their prices fall, as well. But solid investments are more likely to recover once the market stabilizes again.

Keep in mind, too, that you technically don't lose any money on your investments until you sell. So even if your portfolio loses value during a market crash, as long as you hold your investments until the market recovers, you won't lose any money. Pulling your money out of the market, however, could result in losses.

When it comes to market crashes, the good news is that they're normal and temporary. The market has experienced dozens of downturns and corrections over the years, and it's always managed to recover. By staying invested for the long haul, there's a very good chance your investments will bounce back, as well.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.