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[Investing] Stacey Tisdale Shares 3 Reasons Not to ‘Panic Sell’ In A Falling Stock Market

The Benefits Of Riding Out The Storm

Investors around the world are in a panic about the potential impact of the coronavirus on the global economy. Those fears and emotions are being reflected in the stock market.  The S&P 500 had it worst loss since October, as fear spreads about the impact the virus will have on the bottomlines of companies that count on Chinese consumers for sales, and Chinese workers and resources to build their products.  In fact, Apple has closed one retail store in China, and Tim Cook, the company’s CEO, told analysts that many of its suppliers’ factories will be closed until February 10th.

Investors around the world went into a panic over the impact of the coronavirus on the global economy. Those fears and emotions were reflected in the stock market. In March 2020 when the coronavirus was officially declared a pandemic, investors sent stocks tumbling 34%, a bear market. The COVID-19 crash, which began on February 2, 2020 and ended on April 7, 2020, was akin to the crashes from the global financial crisis, the dot-com bubble and 1987 crash, according to MarketWatch.com. Fear spread over the impact of COVID-19 on the bottom lines of small and big companies alike as entire industries shutdown overnight.

Despite a pandemic-induced economic lockdown of epic proportion, the stock market regained ground and the year ended with record highs in all major indexes. For 2020, the S&P 500 returned 16.26% – or 18.40%, counting reinvested dividends. As coronavirus vaccines became widely distributed, investors were optimistic about the future.

Managing Your Fears

The deluge of headlines and uncertainty around how the battle with the coronavirus would play out in the market is an important reminder more than ever that we need to keep our emotions in check.  If you ever wonder what to do about a falling stock market, keeping these 3 tips in mind. They may keep you from making a premature exit from stocks at the expense of future returns.

  1. You haven’t lost a penny until you sell: It’s important to remember this when you see scary headlines or hear fearful ‘water cooler’ chatter about plummeting markets.  Despite its ups and downs, The Dow Jones Industrial Average has had an average return of about 8% from 1921 to present, blowing away any returns you would receive in savings accounts, money market accounts, and cd’s.  Just to give you a snapshot, according to the Motley Fool, if you invested $100 a month between 2007 and 2017, despite the ups and downs of the markets, you investment would have grown to $21,400. If you invested $100 a month between 2012 and 2017 it would $9,300.

Invest small sums on a regular basis, ride out the storm, and give your stock investments time and space to do what they do best: Grow.

  1. Don’t train your brain to make financial decisions based on fear: Fortunately for our physical safety, but unfortunately for just about everything else, the reptilian part of our brain is programmed to respond to fear in the ‘hear and now’ at the expense of logic. Money is so tied to our sense of survival that watching our portfolios plummet or our assets shrink on paper will literally throw our minds and bodies into a fight or flight response. Take a deep breath and reconnect with your long-term financial goals when you sense you’re letting fear run the show. Give your brain experiences that show it that you don’t have to give into panic.
  1. Warren Buffett is right: Buffett is famous for saying It’s wise to be “fearful when others are greedy and greedy when others are fearful.”  In other words, don’t follow the crowd over a cliff.  Heed the billionaires advice and see lower stock prices for what many of them are great buying opportunities.

[Check out my You Don’t Have to Be Rich to Invest webinar to learn quick ways to take get into the stock market for pennies.]

Your Money Personality

When it comes to investing, there are many things to consider. For example:

  • Your tolerance for risk: You don’t want the markets keeping you up at night.
  • Your time horizon: Many experts agree that money you will need in 5 years or less should be in less risky investments like bonds or cd’s.
  • Your long-term goals: Today’s economic challenges make investing essential for many of us in order to create long-term financial security.

Our minds can’t tell the difference between real or imagined fear. It’s up to us to bring our powers of discrimination and reason into our decision making.

 

Stacey Tisdale
Stacey Tisdale
Founder, CEO, Executive Producer

Stacey Tisdale, a more than 20-year veteran TV broadcast financial journalist, and financial behavior expert, is one of the first women, and the first African-American to report from the New York Stock Exchange, in her role as a reporter/anchor for Dow Jones' Emmy Award-winning, Wall Street Journal Television.

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