15 Things to Do -- and Not Do -- During a Stock Market Downturn

Stocks have been volatile for much of 2022, and many investors are seeing that their portfolios are down year to date. But as upsetting and frustrating as stock market downturns are, the way you navigate them could spell the difference between emerging just fine and losing money. With that in mind, here are some things you should and shouldn't do when stock values plummet.

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So your portfolio value is down 10% due to market conditions. That's not great. But remember, 10% isn't 90%. And if you stay the course, there's a good chance your portfolio will recover in time.

Stock market dips happen somewhat frequently. There can be periods when investors get a reprieve, but all told, corrections -- periods when stocks lose 10% of their value from a recent high -- are common. If you remind yourself of that, you'll be less likely to panic.

ALSO READ: The Most Important Thing You Need to Get Through a Stock Market Correction

Some stock market downturns drag on longer than others. But it's possible for stocks to have a single really bad month and then turn things around. In the grand scheme of an investing career that's decades long, that's not such a big deal.

If you're investing for a milestone that's many years away, like retirement, there's no need to get upset or distressed when stock values fall. Even if it takes a year or longer for your portfolio to recover, if you're not planning to use that money for 25 years, a temporary dip won't end up mattering.

A diversified portfolio could limit your on-screen losses -- or actual losses -- during a stock market downturn. Make sure you're invested across a range of market sectors. Or, load up on broad market index funds to simplify the process.

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Presented by Motley Fool Stock Advisor
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If you're nearing retirement, you should limit the extent to which you hold stocks. But that doesn't mean you should dump your stocks completely. Rather, you may want to shift more assets into bonds so you're less exposed in the event of a stock market downturn.

You don't lose money during a stock market downturn unless you liquidate investments when they're down. If you boost your emergency savings, you may not have to resort to selling stocks to drum up the cash you need when unplanned bills arise.

ALSO READ: How to Grow Your Emergency Fund From $1,000 to $5,000 in a Year

You might think it's best to stay out of the stock market during a downturn. But actually, that's a great time to invest. Often, you'll get a chance to scoop up quality stocks at a discounted price.

While there's nothing wrong with buying specific stocks on your watch list during a downturn, it pays to invest in the broad market as well. You can do so by loading up on ETFs, or exchange-traded funds.

ALSO READ: 5 ETFs That Are All You Need for Retirement

It's unsettling to see the value of your portfolio drop from one day to the next. But try to remind yourself that you're only seeing a loss on screen -- nothing more.

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Presented by Motley Fool Stock Advisor
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The last thing you want to do during a stock market downturn is torture yourself by checking on your portfolio daily. Instead, limit yourself to once every few weeks, or even once a month. The more you look at those losses, the more tempted you might be to do something rash.

Dumping stocks when they're down generally means locking in losses. If you have a specific stock in your portfolio that's taken a larger hit and isn't likely to recover, you might choose to unload it. But don't rush to liquidate stocks that aren't down to a larger degree than your portfolio on a whole.

When stocks are down, bonds might seem like a safer alternative, since they're typically a lot less volatile. But there's another risk in buying bonds -- stunting your portfolio's growth. Therefore, you shouldn't be too quick to favor bonds when stocks are shaky.

ALSO READ: How Bonds Work & How to Invest in Them

Maybe you do a good job of managing your money, so you don't spend your entire paycheck. Tempting as it may be to keep your extra cash in the bank, doing so could mean earning a minimal return on your money. As long as you have a solid emergency fund, you should invest your extra cash -- even when stocks are down.

A stock market downturn can be disheartening. But it doesn't mean you're doing anything wrong as an investor. Thus, you shouldn't rush to ditch a strategy that works well for you during periods when the market is stronger.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
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!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

The moves you make -- or don't make -- during a stock market downturn are extremely important. If you stay the course and keep your cool, you'll be less likely to suffer losses -- and more likely to meet your financial goals down the line.

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