The stock market is a highly volatile and unpredictable beast. Sure, there are some general trends and analysis that can help you see where the market might be heading, but it’s still essentially random. You never know when a particular sector – or even the whole market – will take a sudden downturn. When that happens, investors panic and sell their stocks at low prices, causing the value to fall further. This so-called “bear market” is a great time to buy shares in blue-chip companies and other long-term investments that will soon recover their value. Here are five things you can do to stay safe if the market goes down:

Know your investments and their price points

The first thing you should do when the market goes down is know your investments. Make sure you understand the fundamentals behind your stocks, bonds, and other assets. A good rule of thumb is to know the exact price point at which you should consider selling an investment. For example, if you bought company XYZ at $50 per share, you should sell your shares if they drop below $35. You might be losing money in the short term, but you’re limiting your losses to a level that you can recover from. You can also use investment tracking apps like WalletHub to stay up-to-date with your investments.

Stay informed

One of the worst things you can do in a down market is stay ignorant of what’s going on. You need to understand what’s happening in the markets so you can make informed investment decisions. You don’t want to panic and sell all of your investments based on the bad news you’re hearing in the news. Instead, make sure you’re getting information from reliable sources like WalletHub’s economic experts. Stay informed about why the market is going down and how long it may take to bounce back. Read economic reports and forecasts from experts in the field so you have a better idea of what’s happening.

Don’t trade based on emotions

One of the most common mistakes investors make during a market downturn is to trade based on emotions. You might be tempted to sell all of your investments just because they’re going down and you want to cut your losses. Or you might buy more shares of a company because you think it will keep falling and you want to buy in on the low price. Don’t do either of these things. You want to be patient and keep a level head during a down market. Trading based on emotions will only cost you more money.

Make smart investment decisions

Another thing you should do when the market goes down is make smart investment decisions. For example, if a particular industry is struggling, you don’t have to sell all of your investments in that industry. You can sell the stocks of specific companies that are struggling while keeping your other investments in the same industry. Or you can sell stocks that are too risky while keeping your other investments that are more stable. You can also consider dollar-cost averaging, which spreads out your purchases so you buy more shares when the market is down.

Conclusion

The stock market is a highly volatile and unpredictable beast. Sure, there are some general trends and analysis that can help you see where the market might be heading, but it’s still essentially random. You never know when a particular sector – or even the whole market – will take a sudden downturn. When that happens, investors panic and sell their stocks at low prices, causing the value to fall further. This so-called “bear market” is a great time to buy shares in blue-chip companies and other long-term investments that will soon recover their value. When the market goes down, don’t panic. Instead, make sure you know your investments and their price points, stay informed, don’t trade based on emotions, and make smart investment decisions.