When stocks are rising, investors are usually pleased because their investments are increasing in value. But when there’s a dip in the market – whether it’s a short- or a longer-term decline – it can be worrying. A market downturn tends to leave investors uncertain about their investments and what their next move should be.
We’ve got five things you can do when financial markets go down.
1. Don’t panic:
Yes, the market is down, and your investments may have taken a worrying nose-dive. But don’t give into fear. An emotional reaction could lead you to make rash decisions regarding your investments. If you sell your stock in a panic, your theoretical loss becomes a real loss. And if you’re no longer invested in that stock, you could miss out should that stock make a recovery down the road.

2. Stay invested:
If you need to access your money, of course, you may need to sell your investment, but most experts suggest that you hold onto your stock to ride out the lows until the market recovers at least somewhat. Though it’s difficult to do nothing when your stocks plummet, it might be best to simply sit tight and wait it out. If you sell your investment when its value is low, you realize the loss.
3. Revisit your investing strategy and risk tolerance:
Ultimately, if your investment goals haven’t changed, neither should your investing strategy. That’s easy to say when markets are up, but when markets are down, it could be a good time to take another look at your overall investing strategy. If you’re finding it stressful to think about your investments, your risk tolerance may not be as high as you had originally estimated. A sharp or prolonged market downturn can tell you how you really feel about risk. And give you an opportunity to adjust for the future.
4. Tax-loss selling:
There are some circumstances where it might be an advantage to sell your stock when its value declines significantly: on your tax return.
Tax-loss selling (or tax-loss harvesting) is when you sell an investment that has declined in value below its original purchase price. This triggers a “capital loss”, which can be used to offset capital gains you’ve made on another investment, saving you money at tax time. Talk to your accountant to see if this scenario might be right for you.
5. Consider adding to your investments:
When markets dip, you might be able to find more opportunities to invest in undervalued companies. If you’ve been doing your due diligence and have identified a company to invest in, chances are that its stock is trading at a lower price than usual. It might be a good time to consider acting on your research.
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