15 Things Investors Shouldn't Do If the Market Crashes Again

To quote famed billionaire investor Warren Buffett, “Predicting rain doesn't count, building the ark does.” In other words, whether or not rumors of an upcoming crash or correction are accurate isn’t what really matters in the grand scheme of things -- the key is to prepare your portfolio to withstand volatility and flourish in a broad spectrum of market scenarios.

In addition to securing your portfolio for the next market crash by investing in stable, recession-resilient companies that you like and are willing to hold for the long haul, you need to make sure your mindset is geared up and ready to go, too.

On that note, here are 15 things investors shouldn’t do when the market crashes again.

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When the market is in a downward spiral, it’s natural to feel a bit of anxiety, particularly if your portfolio is impacted in the near term. But as a long-term investor, temporary market conditions shouldn’t alter your perspective about buying stocks.

If you have the money to invest, use the period of volatility that follows a market crash to add some premium stocks to your buy basket at bargain valuations.

ALSO READ: 4 Moves to Make if the Stock Market Crashes Tomorrow

While certain stock sectors tend to be incredibly recession-resistant (i.e., healthcare), others tend to be more vulnerable in the aftermath of a market crash. But even high-caliber stocks with great fundamentals and rock-solid competitive advantages can struggle temporarily in market crashes.

One of the worst mistakes you can make during a market crash is to hurry up and sell the stocks in your portfolio that are taking a short-term hit. Not only could you easily end up regretting the absence of these stocks in your portfolio once the market rebounds, but it’s most likely that you’ll be left with the bitter taste of selling at a loss.

And if you’re dead set on selling the stock or stocks in question, it’s still better to wait until the market has recovered before you do so.

High emotions never serve investors well. It’s not unusual for investors to experience the full gamut of emotions in the aftermath of a market crash. If the market crashes or corrects and you find it difficult to get control of your emotions, it’s probably best to hold off on any stock-buying decisions until things have cooled down a bit.

If you can keep your emotions in check and have cash to spare, a market crash can be a favorable occasion to buy top-quality stocks at much cheaper valuations than usual. Just be sure to research and analyze any stock as you normally would, and ensure the companies you buy fit in with your broader long-term investing and portfolio growth strategy.

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The mad dash investors make to buy stocks on the cheap in the days and weeks following a market crash is understandable, and there’s no question that this period can be a particularly favorable occasion to score deals on top stocks.

But that doesn’t mean you need to join in, especially if you’re low on cash or think emotions might be clouding your judgment. Sometimes, the best thing to do in a crash is to hold back investing until the market begins to right itself again.

On the flip side, if you’re on solid financial footing and spot some premium stocks on sale that you want to buy and hold for the long haul, you can certainly get more bang for your buck by investing in a market crash.

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One simple step to keep your emotions under control when the market is down is to refrain from checking your portfolio too frequently. It’s highly likely that at least some of your portfolio will trend downward in a crash, and there’s really no need to witness the spiral on a daily basis. Keep your focus on the long term and try to check your portfolio only occasionally during a market crash.

If portions of your portfolio took a real hit in the last downturn, now is a prime time to work on remedying these vulnerabilities and even rebalancing your holdings. That could take the form of selling off some stocks if your underlying thesis about them has changed, or simply adding more recession-resilient stocks to the mix.

If you decide to invest during a market downturn, remember to do so with portfolio diversification in mind. Not only is diversification an excellent way to incorporate numerous means of long-term growth into your portfolio, but an adequately varied collection of holdings can also help you stabilize your portfolio when market volatility strikes.

ALSO READ: Who's Ready for a Stock Market Crash? 5 Reasons a Big Drop May Be Imminent

For investors who feel particularly nervous when a market crash hits, remember that no correction or downturn is permanent. Recovery from a market crash can take as little time as a few months to years in some cases, but history has taught us that the rebound will happen.

If you can keep your emotions in check and have the necessary liquidity to work with, you don’t need to wait to invest just because the market is temporarily in the tank. In fact, routinely investing in high-caliber companies regardless of what the market is doing is an effective way to maximize your returns and not just survive but thrive in the event of a crash.

You shouldn’t ever invest without a clear strategy, but this is particularly true when the market is down. Investing for the long term involves a commitment to buy and hold any stock you add to your portfolio for a minimum of three to five years. But an effective, well-formed investment strategy goes beyond this basic principle.

Whether you prefer growth investing, dividend investing, or a combination of approaches injected into your personal investing thesis, let your underlying strategy and tolerance for risk continue to guide you as you add new stocks to your portfolio during a downturn.

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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.

We’ve talked previously about how market crashes can present the opportunity to snag some serious discounts on quality stocks. But this doesn’t mean you should go on a mass buying spree just because stock prices are hitting new lows.

If you’re able to buy more stocks in a period of market decline, invest as you normally would, focusing on high-quality companies that you’re willing to hold for the long haul and that align with your personal approach to investing.

ALSO READ: A Stock Market Crash May Be Coming: 5 Things to Do Now

One very important exception to investing in a stock market crash is that if you don’t have the cash to spare, wait and buy more stocks later on when you do. You shouldn’t ever invest cash that you’re likely to need to use within the next several years -- and that’s true in both periods of market highs and lows.

If you think you’re going to need to use the money in the very near future, it’s likely best to wait until your liquidity is built up before you invest more in stocks.

Market highs and lows are among the few predictable realities of investing in the stock market. When you invest for the short term, it’s much more likely that you’re going to lose money because you’re taking on a significant level of risk by making high-stakes investment decisions based on a stock’s performance within an extremely brief window of time.

On the other hand, if you take the long-term view when investing, a market crash is just another event in the much bigger picture and shouldn’t alter the way you invest.

Investing is an ongoing learning process. While it’s best to keep calm and stick to your strategy when a market downturn hits, don’t ignore certain soft spots in your portfolio that may be exposed when the market crashes and might require your attention

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Insufficient savings is one very good reason to hold off on investing when the market is down. It’s important to always have a solid nest egg to fall back on, particularly in a recession, when money may be tighter than usual. If your savings aren’t where they should be -- for example, you don’t have a basic fund of several months’ worth of living expenses set aside -- and you invest some of the cash you do have, you might be forced to cash it right back out before long and end up selling at a loss.

It’s absolutely feasible to save and invest at the same time, but if you have a flailing nest egg and the market crashes, it’s a good idea to work on beefing this up before you jump back into buying stocks.

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.

Whether you’re new to investing or not, it’s easy to throw logic out the window when a market crash comes and your portfolio takes a hit. Of course, that’s the last thing you should do. Even a market crash brings a range of investing opportunities with it, and these periods of downturn will come and go.

Patient long-term investors can grow their portfolios in a variety of circumstances by shutting out the market noise and continuing to invest in high-quality companies that can weather the storm and generate durable returns for years to come.

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