Please ensure Javascript is enabled for purposes of website accessibility

3 Things I'm Not Doing During the COVID-19 Stock Market Downturn

By Maurie Backman - Mar 25, 2020 at 6:18AM

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

Knowing what not to do can help you avoid costly mistakes.

The COVID-19 health crisis has sent the stock market plummeting in recent weeks, so much so that we've officially entered bear market territory. And with each day bringing more and more bad news about confirmed cases and widespread job loss, it's hard to see the light at the end of the tunnel.

In fact, it's natural to get discouraged at a time like this, both as a person and as an investor. But the moves you make -- or don't make -- in the coming weeks could really have an impact on your long-term financial health, so with that in mind, here are three things I'm specifically not doing during the current downturn.

A jagged arrow moving generally downward against a backdrop of columns of numbers

IMAGE SOURCE: GETTY IMAGES.

1. Panic selling

It's easy to take a look at your portfolio, gasp, and start selling off investments left and right in an effort to stop the bleeding. But one thing you need to remember about any stock market crash is that you only lose money if you actually your liquidate investments when they're down. If you stay calm and leave your portfolio untouched, you won't guarantee those losses.

Remember, the stock market has a strong history of recovering from downturns -- even major ones. So unless you need to sell investments to cover essential near-term expenses, leave yours alone.

2. Checking my portfolio balance every day

Having online access to brokerage accounts can be both a blessing and a curse. On one hand, it makes it easy to make trades or see how your portfolio is doing. On the flip side, though, it makes obsessing over losses easy as well. That's why I've pledged not to check my portfolio every day during this downturn.

What I did do last week was see how much cash I had available in my brokerage account and review my stocks to ensure they were fairly well-diversified. But I haven't checked my balance since, which is better for my mental health.

3. Avoiding new stocks

When the stock market is down, it's easy to assume that sitting back and staying away is a smart move. But if you have money on hand to invest, now is actually a great time to buy quality stocks while they're less expensive. Another option? If you don't want to research individual stocks (say, if you find the process too daunting), load up on S&P 500 index funds. These funds follow the broader market and aim to match its performance, and they take a lot of the legwork out of investing.

To be clear, I won't be raiding my emergency fund to pad my stock portfolio. Rather, I'll be using any extra money I earn, as well as the money I already have sitting in cash in my brokerage account. While now is a good time to invest, don't do so with the money you may end up needing for shorter-term expenses, especially since a full-blown recession could be right around the corner.

Stock market downturns are by no means easy to deal with, so really, the best thing you can do in the coming weeks is keep calm, breathe deeply, and avoid rash decisions. We don't know how long the current crisis will play out, but it helps to have faith in the stock market's ability to rebound, as it's done so many times before.

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 analyst team.

Stock Advisor Returns
322%
 
S&P 500 Returns
113%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

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

Premium Investing Services

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