Never Sell During a Crash
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You only lose money during a stock market crash when you sell. Some of the biggest swings (positive and negative) in the stock market can be attributable to a handful of days.
JP Morgan found that 7 of the 10 best days the S&P 500 index had between January 2002 and January 2022, happened within two weeks of the 10 worst days. The S&P 500 index is a good indicator of the overall stock market because it represents the 500 largest companies in America, which represents about 80-85% of the US stock market. The US stock market in total represents over half of the global stock market.
If you had missed out on the 10 best days the index had your returns would almost be cut in half from 9.4% to 5.21%.
If you think that you can circumvent this problem by selling before the market crashes and then reinvesting at the bottom, know that you are playing with fire. More often than not investors who do this get burnt badly because they miss out on the days where the market has the strongest rallies.
“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has.” - Jack Bogle
The lesson to take away is that stock market investors are rewarded for standing by their investments and riding out the bad days in the market.
Do not make investment decisions out of emotion, make them following logic. Markets will always fluctuate. Stay the course.