As an investor in the stock market, experiencing a downturn can be unnerving. Seeing red numbers and falling prices may trigger emotional responses like panic, leading to irrational decisions. However, staying composed and following a strategy is critical to long-term success. Here’s what investors should do when the market is going down:

1. Stay Calm – Don’t Panic

Market corrections and downturns are a natural part of the stock market cycle. History shows that while markets do experience temporary declines, they generally recover over time. The worst thing you can do during a downturn is panic sell. Remember, you haven’t actually lost money until you sell your investments at a loss. Staying calm and avoiding knee-jerk reactions is key to riding out market volatility.

Before making any decisions, take a step back and remind yourself of your long-term financial goals. Market volatility is normal, and reacting impulsively often leads to poor decision-making.

2. Review Your Investment Strategy

When the market is down, it’s an excellent time to revisit your investment strategy. Ask yourself the following questions:

• Have your financial goals changed?
• Do your investments still align with your long-term objectives?
• Is your risk tolerance still the same?

If your goals haven’t changed, you should stick to your plan. Market downturns can offer opportunities to buy high-quality stocks at lower prices. However, if your investment plan needs adjustments, now might be a good time to rebalance your portfolio.

3. Stick To Dollar-Cost Averaging

One of the best strategies during and outside of market downturns is dollar-cost averaging (DCA). This involves investing a fixed amount of money at regular intervals, regardless of the market’s condition. By doing so, you purchase shares regardless of the price level, which reduces the average cost per share over time.

DCA allows you to take advantage of lower prices during downturns without trying to time the market. It’s an automatic way to grow your portfolio without stressing over short-term fluctuations. We’ll dive deeper into DCA in another blog.

4. Look for Opportunities

Down markets often present buying opportunities. High-quality companies with solid fundamentals or may be undervalued during a downturn, offering a chance to buy shares at a discount. If you’ve been eyeing certain stocks, now might be the time to invest in them.

However, it’s essential to do your research and not invest blindly. Stick to companies with strong financial health, good management, and long-term growth potential. Investing in solid businesses during a downturn can yield significant returns once the market recovers. Even better yet, you can take the opportunity to load up more on your trusted exchange-traded funds (ETF).

5. Focus on the Long Term

In volatile markets, it’s easy to get caught up in the day-to-day fluctuations. However, investing should always be approached with a long-term perspective. History has shown that, over time, the stock market tends to grow, despite short-term dips and corrections. Focus on your long-term goals rather than the current market conditions. Keep in mind that attempting to time the market is almost impossible. By maintaining a long-term perspective and sticking to your plan, you will likely emerge stronger when the market rebounds.

Instead of checking your portfolio obsessively, remind yourself that downturns are temporary, and focus on the bigger picture of financial growth over the years.

6. Avoid Excessive News Consumption

When the market is down, the media tends to amplify the negative news, fueling anxiety and fear among investors. Constantly checking news outlets and social media can heighten emotional responses, leading to poor decision-making. To stay informed without getting overwhelmed, limit the time you spend consuming financial news and only rely on trusted, reliable sources for your information.

Conclusion: Stick to Your Strategy and Stay the Course

When the stock market is going down, it’s essential to stay disciplined, avoid emotional reactions, and continue following your investment strategy. Remember that market downturns are a normal part of investing, and they often provide opportunities for long-term growth.

Whether you choose to hold steady or take advantage of the dip to buy quality stocks at lower prices, maintaining a calm, calculated approach will help you navigate the volatility with confidence. Investing is a marathon, not a sprint. Stay focused on your long-term goals, and you’ll be better equipped to ride out the storm.