5 reasons not to worry about a stock market crash

It has been nearly a year since the stock market experienced one of its biggest collapses in history. Who can honestly say that they didn’t feel at least a hint of panic when it looked like a third of their wealth had just vanished?

If you think another crash is happening, you are right. The stock market has undergone 38 corrections since 1950. Here are five reasons to stop worrying already.

Image source: Getty Images.

1. You want to invest when others are in panic.

If you had invested $ 10,000 in the S&P 500 index on March 23, 2020, when the index hits the bottom, you would have over $ 17,500 today. Of course, you shouldn’t rely on the ability to determine when stocks will bottom out. But the point is, a stock market crash can be a tremendous opportunity if you are prepared for it.

Rather than panicking about a stock market crash, make a list of stocks to buy in the next stock market crash. These should always be stocks that meet your investment thesis and that you would like to own even if the market hasn’t fallen. But if they meet these criteria, the next crash is the opportunity to buy at a good price.

2. If you don’t sell, the losses will be temporary.

The easiest way to avoid losing money in a crash: don’t sell during a crash. If you can afford to give your investments time to recover, most of the losses you have suffered will go away. Of course, some fragile companies will not survive a bear market. But rather than worrying about the next crash, take the time to check your portfolio and sell anything you don’t want to hold for the long term.

3. A bad day often means the best days are yet to come.

If the market has just collapsed, chances are good days are about to happen. Between January 3, 2000 and April 19, 2020, seven of the top 10 trading days occurred within the two weeks of the worst days. Five of the best days happened in the worst day week.

Many experts predicted last spring that the stock market could take years to recover from its losses. In fact, the S&P 500 Index only took 126 days to recover after hitting a low on March 23. The best trading day of 2020 was March 24, when the S&P 500 climbed 9.38%. The Dow Jones Industrial Average also recorded its biggest gain since 1933 on that day. That’s not to say every recovery will be so quick. But a crash doesn’t mean your investments will be in landfills for years to come.

4. You can still make money with these dividend paying stocks.

Even if stock prices go up, your returns won’t necessarily be negative or zero. Investing in dividend paying stocks can help you generate returns, even in the event of a crash. Dividends are obviously never guaranteed. But the Dividend Kings have increased their dividends for 50 consecutive years or more. Dividend aristocrats have at least 25 years of experience with dividend hikes. Investing in companies that have a long history of increasing their payments each year – even during a prolonged downturn – can give you some peace of mind.

5. The market has always recovered eventually.

History tells us why you shouldn’t lose sleep after a stock market crash: Your chances of profiting from an investment in the S&P 500 are 73% in any given year. Over five years, your chances are 87%. Over 10 years, the chances are 94%. And the returns of the S&P 500 over a 20-year holding period have always been positive.

Recoveries don’t always happen as quickly as you want them to. But just as you can count on the market downturn, you can also count on it to rebound over time.