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15 Reasons Not to Sell Your Stocks When the Market Crashes Again

Author: Rachel Warren | July 21, 2021

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Another market downturn could be imminent

The stock market has been highly volatile of late, and many investors are wondering with increased concern whether another market crash could be days or weeks away.

However, just because a market crash happens doesn’t mean you should give into panic or sell your stocks. In fact, doing so could seriously sabotage your long-term investing strategy.

If you’re thinking about selling your stocks if the market crashes again, that is one of the last things you should do. Here are 15 compelling reasons why you should stay the course in the next market crash.

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1. Selling your stocks probably won't help your portfolio

When the market crashes, it’s not unusual for investors to see typically high-performing stocks in their portfolio lag or experience a significant drop in share price. If this happens, investors may naturally feel the urge to rush and sell these stocks that seem to be temporarily dragging their portfolio down.

However, this is -- almost without exception -- a huge mistake. Cashing out your stocks after a few bumpy trading days or weeks is the very antithesis of a robust long-term investing strategy and is almost certain to harm rather than help your portfolio’s performance.

ALSO READ: 3 Dow Stocks to Buy When the Stock Market Crashes

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2. You should be thinking about your long-term investment objectives rather than focusing on short-term market situations

Try to only check your portfolio occasionally when the market is down so that you’re not focusing too much on short-term declines in your holdings.

If the market crashes and you’re suddenly itching to sell one or more of your stocks, look beyond short-term share price movements. Instead, focus on the strength and competitiveness of a stock’s underlying business and its ability to generate long-term growth for your portfolio.

If your assessment of these elements remains unchanged, don’t let widespread investor panic cause you to sell high-quality companies and deter you from moving toward your long-term investment goals.

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3. Losing money is almost a given

One of the most fundamental reasons not to sell your stocks when the market is down is that you’re almost guaranteed to lose money doing so. Unless you’re in dire need of the cash, wait and let the market rebound a bit before you make a decision that could permanently impact your portfolio.

More likely than not, as the market rebounds and emotions become less heightened, you’ll be glad you held onto the stock or stocks in question rather than selling in a panic-fueled moment.

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4. You could forfeit portfolio returns by panic selling your stocks because share prices are down temporarily

A well-rounded portfolio filled with a diverse collection of investments can help your portfolio stay on track throughout the highs and lows of the cyclical stock market. If you make a rash decision and get rid of some of your stocks because shares have fallen, you could be giving up valuable catalysts for long-term portfolio growth.

And remember -- a stock isn’t good or bad on the sole basis of its share price. A great stock can still end up trading at a discount, and a less-than-premium stock can be wildly overpriced.

ALSO READ: Are These 2 Crashing Stocks Worth Buying on the Dip?

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5. You could end up with an underdiversified portfolio

If you jump to sell stocks when the market takes a tumble, you could end up with a far less balanced and well-rounded portfolio than you started with. This could not only make your portfolio’s performance exceedingly more volatile but also hinder its optimal recovery in the aftermath of the crash.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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6. You should focus on strong buying opportunities during market crashes rather than rushing to sell stocks

There’s no shortage of great stocks to buy, and this is true when the market is up and when the market is down. If you have the cash to do so, look for opportunities to buy high-quality stocks that are trading at a discount because of the downturn and can fuel long-term returns over the span of years.

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7. You're far less likely to sustain long-term losses if you wait out the market crash

When you take a look at your portfolio in a market downturn and see the prices of your favorite stocks plummet toward rock bottom, you’re not alone if you feel discouraged or your emotions heightened. But the reality is, these losses are only temporary. When the market rebounds, so eventually do most top stocks.

ALSO READ: 3 Tricks to Successfully Ride Out a Stock Market Crash

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8. The market will recover -- it's just a matter of time

No two bear markets are precisely alike. Historically, the market can take anywhere from several months to more than a year to recover from a downturn, but recover it will. Take, for example, the March 2020 bear market, which lasted just over a month before stocks began to rebound into bull territory.

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9. A versatile portfolio of high-quality investments can take the heat

While this doesn’t mean that your portfolio’s performance won’t be temporarily impacted if a crash happens, a well-diversified group of investments can keep your holdings above water when the market is down and can drive faster recovery when it rebounds.

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10. You don't have to do anything

Don’t panic if your portfolio drops in value when the market crashes -- this is expected and normal. While market crashes can present plenty of great opportunities to invest, there’s no shame in just sitting back and waiting for things to settle down before you jump back into buying stocks. It’s better to wait and do nothing than to panic sell holdings you’ll likely wish you’d held onto later.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

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11. You could erase years of portfolio gains

When you invest your hard-earned money in stocks, it’s no fun to see your holdings drop in value when the market takes a turn for the worse. However, these losses are rarely long-lasting and, once the market starts to recover, chances are your portfolio will, too.

On the flip side, if you sell certain stocks because they underperformed for a few weeks or months, you’ll not only fail to realize those post-crash gains but diminish some of the valuable time and effort -- not to mention money -- you spent on building up your portfolio in the first place.

ALSO READ: Should You Invest When the Stock Market Is Volatile?

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12. Your portfolio could take much longer to bounce back as the market rebounds

Rather than helping your portfolio ride out the storm, selling your stocks when the market is down can actually weaken your overall basket of holdings. And when the market does rebound, your portfolio’s road to recovery could be much slower and its overall performance significantly eroded.

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13. You could end up with less cash than you started with

If you sell your stocks during a market crash, this means you’re unlikely to even get the money back that you invested in that company in the first place. There are many reasons investors decide to sell a stock at a loss, whether it’s because they need the cash, for tax reasons, or otherwise.

That being said, if you still believe the stock to be a quality long-term investment, selling in a market crash just because shares are down can be a terrible mistake. As the old saying goes, “Never make a permanent decision about a temporary situation.”

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14. You could turn a short-lived portfolio decline into an irreparable loss

When your holdings are down because of a crash, it’s important to remember that as long as you wait out the market mayhem and don’t sell your stocks just because emotions are high, you haven’t actually lost money. You’re almost inevitably going to sell at a loss if you dump your stocks in a market crash, making what would likely have been temporary portfolio losses irreversible.

ALSO READ: 3 Expensive Stocks I'd Sell Before the Next Market Crash

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15. Crashes are an expected market event

As a long-term investor, you’re going to experience multiple market crashes throughout your investing journey. Rather than living in existential dread of these inevitable events, invest only in excellent companies that you’re confident holding for years at a time in all types of markets.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Previous

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Long-term investors needn't fear market crashes

It’s not always easy to stay calm when the market heads into murky waters, but long-term investors have the benefit of time on their side and know that these market events will come and go.

The best way to protect your portfolio from excessive volatility during a crash and maximize your portfolio’s performance in a bevy of market scenarios is to invest in quality companies poised for long-term growth when the market is up and when it’s down. A robust recovery almost always follows a market crash, and investors who stayed the course through the storm can reap the rewards of the rebound.

The Motley Fool has a disclosure policy.

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