The Millennial’s Guide to Keeping Calm When the Stock Market Plunges
Millennials. We’re still new to the stock market.
The lucky few born in the early ’80s who started putting money in their 401(k)s right out of college have only been investing for 15 years.
For the rest of us with student loans and parents who said, “Index what?” when we asked them about retirement options, we’ve probably had only a few fumbly years to try out this whole stocks and bonds thing.
So when the Dow Jones falls 1,400 points in two days, it can be a little nerve-wracking and confusing.
Here’s what to do when the stock market is correcting or bearish if you still have a good 30 years left until retirement.
Repeat After Me: Stock Market Drops Happen
First, you should know that this is normal. The Dow dipped 1,175 points in one day as recently as February. We’re in the middle of the longest bull market (or rising market) run in U.S. history, but the market has still moved in the opposite direction every so often.
Here are some other recent dips during our bull market run:
- May 2010: The Dow dropped 1,000 points in a day.
- August 2011: The S&P 500 entered a short bear market (20% fall).
- August 2015: The Dow fell over 1,300 points in a week.
And obviously, let’s not forget that we’ve come back from the Great Depression, Black Monday, the dot-com bust and the Great Recession.
As millennials, we’re more than able to wait out the storms of the market because we have so much time left in it. This has happened to every generation, even without the amazing bull market we’re experiencing, and the people who stay consistent are fine.
What to Do When the Stock Market Has a Bad Day
Here’s one thing you shouldn’t do: check your portfolio.
When the market is dropping, the last thing you need to do is sit in front of your computer overanalyzing every choice you’ve ever made.
You’re young! Go outside, spend time with your family — don’t waste a single ounce of thought on what you should do with your investments. If you have a well-diversified portfolio with a good mix of funds, you’ll come out on top. This is not the time to second-guess yourself.
And here’s one thing you can do: invest more.
You read that right! Obviously, this is up to your personal preference and risk tolerance, but think about these wise words from billionaire Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.”
No one knows what the future holds, but every investor wishes they could go back to any of those crashes I mentioned earlier and put their whole paychecks in at rock-bottom prices.
History has shown that the market always trends up in the long term. It’s a heck of a ride, and no one on TV or the internet can tell you with certainty where it’s going next, but if you’re patient and consistent, you’re likely to end up on top.
Jen Smith is a staff writer at The Penny Hoarder. She gives money-saving and debt-payoff tips on Instagram at @savingwithspunk.