3 Smart Moves Investors Can Make in the Stock Market Crash — and 1 Big Mistake to Avoid

To be clear, I’m not talking about timing the market. It’s entirely possible the S&P 500 could fall another 10% or even more if the trade war intensifies or causes a spike in inflation.

However, the point is that if you’re a long-term investor, a drop of 20% or more from the highs has historically been a great time to put money to work. For example, if you had bought a simple S&P 500 index fund when it first fell by 20% in the 2022 bear market, you would be sitting on a 39% gain today, even after the recent market crash.

Here’s a more historical example. Say that you invested in the S&P 500 when the market first fell by 20% in the 2008 financial crisis. Even though you would have been “early” and there was another 30% downside to come, you would have had a 450% total return in the roughly 17 years since.

On a similar note, a bear market can be a great time to boost your contributions to retirement accounts and college savings accounts. As a personal example, I have an auto-drafted contribution going into both of my kids’ 529 savings plans once a month, but I recently decided to make an extra contribution to take advantage of the decline, since my oldest child is still about nine years away from college and there’s plenty of time to ride out the ups and downs.

You don’t necessarily need to increase your retirement contributions or put cash to work in a down market if you’re uncomfortable doing so. Simply staying the course with your investments, no matter what the market is doing, is a time-tested long-term strategy.

Just as important as what you do during a bear market is what you don’t do. The No. 1 mistake people make in downturns and crashes is to panic and sell. And I get it. When stocks start to fall, it’s human nature to want to sell “before things get any worse.” And when stocks go up, that’s when our instincts tell us to put our money in.

It’s common knowledge that the central goal of investing is to buy low and sell high, but our natural instincts tell us to do the exact opposite. If there was a No. 1 move to keep in your bear market playbook, it would be to hold on to good companies in your portfolio for as long as they remain good companies. In other words, unless something significant has happened to the business itself (not just to the stock price), selling into a down market is usually a bad idea.

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3 Smart Moves Investors Can Make in the Stock Market Crash — and 1 Big Mistake to Avoid was originally published by The Motley Fool