5 Things To Do When Stock Market Crashes (2024)

FAQs

What do you do when the stock market crashes? ›

If you have a certain amount in your investment account and that balance drops during a market crash, what happens to that money? It doesn't actually go anywhere, as confusing as it may seem. While it appears that you're losing money during a market crash, in reality, it's just your stocks losing value.

If you are a short-term investor, bank CDs and Treasury securities are a good bet. If you are investing for a longer time period, fixed or indexed annuities or even indexed universal life insurance products can provide better returns than Treasury bonds.

Money Market Mutual Funds

Money market funds are ultra low-risk mutual funds that invest in securities with short maturity periods, making them among the lowest-risk investments available outside of government bonds.

Don't panic-sell

The most important thing not to do in a market crash is panic-sell.

No one, including the company that issued the stock, pockets the money from your declining stock price. The money reflected by changes in stock prices isn't tallied and given to some investor. The changes in price are simply an independent by-product of supply and demand and corresponding investor transactions.

This decreased demand means less competition for homes on the market, which in turn means sellers who are more open to lowering their prices. So buying during a recession, if you are financially able to, may get you a better deal.

Do you lose all your money if the stock market crashes? ›

Do you lose all the money if the stock market crashes? No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.

What are the best investments during a stock market? Some investments that may provide positive returns during a stock market crash can include safe-havens such as gold and the US dollar. Companies related to consumer staples also tend to rise in value, such as utility, food or pharmaceutical stocks.

When the stock market is in free fall, holding cash helps you avoid further losses. Even if the stock market doesn't drop on a particular day, there is always the potential that it could have fallen—or will tomorrow. This possibility is known as systematic risk, and it can be completely avoided by holding cash.

A stock price can't go negative, or, that is, fall below zero. So an investor does not owe anyone money. They will, however, lose whatever money they invested in the stock if the stock falls to zero.

The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.

A stock market crash can result in a bear market, which occurs when the market falls by 10% or more after a correction, for a total drop of 20% or more. A stock market fall might cause a recession. If stock prices fall substantially, corporations will have less capacity to grow, resulting in insolvency.