When the stock market is flashing red and the news is screaming about a crisis, it is easy to panic. A market drop of 10 to 30 percent happens regularly, and it is completely normal. It is in these periods that real fortunes are built or lost, depending on how you react.
"Fear and worry are just misplaced imagination."
— Florence Scovel Shinn
Instead of fantasizing about losing all your money, you should zoom out. Historically, the market has always recovered and reached new highs. Those who sell in a panic at the bottom turn a temporary drop in value into a permanent loss.
Strategies for survival
Keep a cool head: Warren Buffett says the stock market is a device for transferring money from the impatient to the patient.
What you SHOULD do
- Sit tight if you own good, solid companies.
- Use spare cash to buy more stocks on sale.
- Turn off the news and log out of your online bank.
What you SHOULD NOT do
- Sell in a panic just because the price has fallen.
- Try to time the bottom (it is almost impossible).
- Log in every hour to see how much you have lost.