15 Reasons Not to Worry About Another Stock Market Crash

Investor chatter about another stock market crash has been a constant ever since last year’s downturn and the months of historical highs that followed. In any given year, no one can predict with reasonable certainty whether or not a market crash or correction will happen. And while warning signs often precede a decline, the market is famously unpredictable.

If you’re feeling uneasy about all this talk of another crash, here are 15 reasons you shouldn’t worry about the rumors regardless of what the market does in the coming months.

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Over the past year, the stock market has consistently delivered multiple days of record-setting highs. Tremendous gains in the COVID-19 vaccine race and multiple waves of stimulus money continue to propel the stock market’s current rally.

History has also taught us that, in the aftermath of stark downturns, the market often not only recovers but clocks record highs in the process.

Periods of downturn are relatively short-lived compared with the broader life span of the stock market. Ups and downs in the market are inevitable, but committed long-term investors can achieve portfolio growth in all types of market conditions.

ALSO READ: Worried About a Stock Market Crash? 5 Ways to Be Ready

It’s easy to feel panicked when the market takes a turn for the worse, but this isn’t an emotion that serves any investor well. In times of market turmoil, it’s best to keep a cool head and wait it out rather than panic and engage in the mass sell-off that generally occurs in this kind of environment.

Rather than worrying about another market crash, focus instead on what you can do right now to make your portfolio more recession resilient. Prime your portfolio to deal with market volatility by investing in a diverse collection of companies (i.e., growth stocks, value stocks, dividend stocks) in a range of industries that display varying risk profiles.

If you only buy top-notch stocks that you fundamentally believe are quality businesses and that you’re willing to hold onto for at least three to five years, near-term market headwinds shouldn’t necessarily concern you all that much. And when you’re in it for the long haul, a short-lived dip in the share price of your favorite stock shouldn’t inform the trajectory of your buying decisions.

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Certain sectors and stocks perform better in a recession than others, particularly companies whose products and services are in demand in any market environment. Tracking a stock’s balance sheet growth and overall financial performance in past periods of economic downturn can also help to inform your decisions when evaluating more recession-resistant buys for your portfolio.

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.

When the stock market crashes, you don’t need to rush to buy up stocks just because there are plenty of bargains to be found. In fact, if your emergency fund is running low or you're thinking about cashing out part of your portfolio in the near future, buying more stocks is the last thing you should do.

However, if you’re in a robust position cash-wise and have some extra liquidity to work with, a market crash can present an extremely favorable buying window for long-term investors to grab some premium stocks at a much more affordable price.

There’s no shame in simply waiting out a market downturn or correction. If you’re overleveraged, don’t have enough cash to fall back on in case of emergency, or emotions are clouding your judgment, better to bide your time and wait to jump back into the game until after things have normalized.

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Another reason not to worry about another crash is the simple fact that these market events can and will occur. There’s nothing any investor can do to avoid this reality. The market rises and falls over time.

If you’re concerned that the current makeup of your portfolio is too prone to vulnerability in the event of a market crash, consider incorporating some lower-volatility buys into the mix.

Your portfolio will fluctuate over time just like the stock market. The short-term performance of your portfolio shouldn’t impact your long-term investing mindset. However, if you detect negative trends in your portfolio performance over a lengthier period, there’s nothing wrong with assessing where there may be room for improvement and whether your portfolio may need rebalancing.

Risk is a part of life and it’s a part of investing. Just as the occurrence of stock market crashes is an unavoidable aspect of investing, the fact that these periods of volatility will come to an end is equally inevitable.

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.

It’s perfectly normal for your portfolio to take a temporary hit when the market crashes. During a market crash, portfolio losses due to falling stock prices happen to even the best of investors. Your portfolio losses during a crash will rarely be permanent. When the market is down, try to resist the urge to check your portfolio too often and don’t buy new stocks unless you are in a solid financial position to do so.

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Generally speaking, price is never the sole indicator of a good or bad stock. In other words, neither a cheap or expensive stock price tells the whole story about a company or its potential as an investment. A stock can be cheap and still be a great buy just as easily as a less-than-stellar stock can be overpriced.

While some stocks see share prices remain steady or even rise during a market crash, others experience a period of a stark decline in value. This is common in the aftermath of a market downturn. One of the easiest ways to do long-term harm to your portfolio is to panic and sell quality stocks at a loss on the basis of short-term price declines amid increased market volatility.

Just because a quality stock has a shaky few quarters in the wake of a market downturn doesn’t mean it suddenly loses its value as a compelling investment. If you believe in the long-term potential of a business and the factors it brings to serve your greater portfolio goals, near-term market volatility shouldn’t diminish this sentiment.

The vast majority of portfolio losses during a market crash can be recovered with time and patience. The easiest way to lose money during a market crash is to act on emotion and sell off your stocks on the basis of a near-term drop in share price or revenue.

ALSO READ: Buy These 3 Stocks in Any Stock Market Crash

A long-term investing mindset means looking beyond immediate market volatility and ignoring the urge to invest based on the market’s whims. This kind of investor focuses on the growth and value that a surefire stock can bring to a portfolio over a period of years rather than in just a few months or quarters, and in doing so can achieve and maintain the kind of portfolio returns that generate long-term wealth building.

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.

It’s highly possible that investors could see another market downturn in 2021, but it’s just as plausible that the current stock market rally could continue to fuel amazing returns for investors without a correction or dip occurring in the near future.

You can’t control what the market does, but you can control how you prepare for and respond to these periods of uncertainty. If you haven’t already done so, evaluate just how risk-averse or risk-tolerant you are, and let these considerations impact the kinds of stocks you incorporate into your basket of investments both now and in the future.

You know that the best way to build wealth through the stock market is to invest for the long term, but few quotes sum this strategy up as well as the following quip by famed investor Warren Buffett: “Buy a stock the way you would buy a house. Understand and like it such that you'd be content to own it in the absence of any market.”

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