NEW YORK, NEW YORK – MARCH 28: Traders work on the floor of the New York Stock Exchange (NYSE) on … More
When President Donald Trump announced the size and scope of the new “Liberation Day” tariffs, I knew the markets wouldn’t take it well — but even I was surprised by just how fast and far everything dropped.
Major indices are now down double digits, and the impact on individual companies has been brutal. There’s real fear out there — about trade wars, about a possible recession, and about what this means for our financial futures.
If you’re anything like me, you’ve probably been staring at your red portfolio, refreshing the news, and wondering “what should I be doing about this?”
This isn’t the first market crash I’ve been through, and it won’t be the last — but that doesn’t make it any easier when you’re in the middle of it.
So instead of panicking, I’m taking a deep breath and following these seven steps to stay sane:
1. Do Not Panic And Sell
It’s hard to see a sea of red and not react. When the market crashes, your fight or flight response will kick in and you will want to do something. Anything.
Resist the urge. When you sell, you lock in your losses. You also lose out when the market recovers. We’ve seen this story play before.
If you can afford to wait, wait. If you can’t, it’s understandable that you may wish to sell some of your investments to raise cash.
2. Reassess Your Portfolio
Everyone thinks they can stomach a downturn until the market turns too quickly. Now you truly understand whether you can stomach the market falling 10%, 20% or more in a span of just a few days. It’s extremely difficult.
While I wouldn’t make any drastic decisions now, review your portfolio and see whether it matches your true risk tolerance.
If you want to adjust your portfolio allocation, try to do it with additional contributions. If you wish to increase the percentage of your portfolio allocated to bonds, make them a higher portion of your contributions going forward.
The best approach, if you can stomach it, is to rebalance your portfolio when the market has recovered.
3. Keep Investing Regularly
The market will recover but we won’t know when or over how long a period of time. This underscores the importance of continuing to invest regularly according to your financial plan.
When you keep investing, you are buying stocks when they are on sale. As the market recovers, you’ll be rewarded for your discipline.
4. Review Your Emergency Fund
Your emergency fund is your first line of defense against financial disasters. While the main cause of the recent crash was the size and scale of Trump’s tariffs, the severity is due to the fear of a recession.
The biggest financial disaster during a recession is job loss. If you are concerned that you may lose your job, it underscores the importance of having a fully funded emergency fund of at least six months. Preferably 12.
5. Look For Opportunities
If you prefer to invest in individual companies, this may be a good time to see if the pullback created favorable opportunities. If a company is less likely to be negatively impacted by tariffs or if you believe the market unfairly punished them, it might be a good time to buy shares while they’re on sale.
6. Stay Focused On The Long Term
Since World War II, the median bear market lasted just 13 months. As long as you hold a long-term view, your investments will be fine.
When the stock market crashed during the pandemic, it recovered fairly quickly. The market hit rock bottom in March 2020, down 34% from its peak, but recovered by August of that year.
Maintain a long-term view and your retirement will thank you.
7. Stop Constantly Watching Your Investments
Watching your investments drop can take a huge emotional toll. If you want to keep your sanity, avoid obsessing over financial news all day.
Your portfolio performance has very little impact on your day-to-day activities. Our kids don’t know how much we “lost” in the stock market these last few days.
Focus on the things in life that matter to you such as getting more exercise, spending more time with friends or meditating.
Everything will work itself out in due time.