{"id":896,"date":"2020-03-07T22:03:25","date_gmt":"2020-03-08T06:03:25","guid":{"rendered":"http:\/\/retirementhangout.com\/?p=896"},"modified":"2020-03-07T22:03:25","modified_gmt":"2020-03-08T06:03:25","slug":"the-market-just-crashed-what-should-i-do","status":"publish","type":"post","link":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/","title":{"rendered":"The Market Just Crashed! What Should I Do?"},"content":{"rendered":"\n
\"\"
Headline from 1929 Stock Market Crash<\/figcaption><\/figure><\/div>\n\n\n\n

As I write this post, the Dow Jones Industrial Average has\njust dropped 1,000 points \u2013 the sixth 1,000 point move in the last 12\ndays.  The Dow and the S&P 500 are\n13% below their most recent high, well into correction territory.  The interest rate on 10-year Treasuries, a\nsafe haven in times of market turmoil, has dropped to a record low 0.7% — substantially\nless than inflation and only slightly better than stuffing your money in a\nmattress.  (The interest rate on\nTreasuries, as with all bonds, is inversely related to its price.  As panicky buyers bid up the price, the\ncorresponding interest rate is driven down.)  \nThe Fed just announced a \u00bd percentage point cut in the interest rate it\ncharges banks \u2013 an emergency stimulus that, thus far, appears to have had\nlittle effect.  <\/p>\n\n\n\n

Why is the stock market taking a nose dive?<\/h5>\n\n\n\n

What\u2019s causing all this sturm und drang<\/em>?\u00a0 The coronavirus, aka COVID-19, is the culprit for the current swoon.\u00a0 With over 100,000 cases and 3,000 deaths in multiple countries (the vast majority in China), this new (to humans) virus is bidding fair to become the next worldwide pandemic.\u00a0 After about a month of watching China struggle to contain the virus, cases began cropping up in South Korea, Japan, Iran, Italy and elsewhere.\u00a0 The world realized that this virus was becoming a true worldwide scourge.\u00a0 The stock market reacted accordingly, beginning a series of dizzying gyrations \u2013 mostly free falls, but also some up days when relative optimism made a brief comeback.\u00a0 <\/p>\n\n\n\n

Why should the coronavirus affect the stock market?\u00a0 A certain amount of the reaction is simply fear and uncertainty about how severe the virus\u2019s impacts will be and how long they will last.\u00a0 But real economic effects are also starting to be seen: airline traffic and other travel have dropped precipitously, factories are shuttered and workers furloughed (at least in China). Big companies like Apple have warned that their supply chains have been disrupted and their production and profits will suffer in the months ahead.\u00a0 Schools are closing down or going online, restaurant traffic is plummeting, and those who can are working from home.\u00a0 Increasingly, people are canceling travel plans, avoiding public places, and hunkering down.\u00a0 \u00a0Some economists are predicting a recession.\u00a0 It\u2019s no wonder the stock market reflects these worries.<\/p>\n\n\n\n

To anyone who has a significant amount of money invested in\nstocks, this sudden market downdraft is unsettling, to say the least.  If you\u2019re in retirement, or close to it, it could\ncause anxiety or even outright panic, as you watch your hard-earned savings go\nup in a puff of smoke and, perhaps, your dreams of a comfortable retirement\nthreatened.  So \u2013 what should you do?<\/p>\n\n\n\n

What can you do?<\/h5>\n\n\n\n

The best advice for most people is to take a deep breath and\u2026 do nothing.\u00a0 It\u2019s never a good idea to make significant financial moves while feeling pressured or panicky.\u00a0 If you had a well considered long-term investment strategy before the sudden correction happened (and you shouldn\u2019t be holding stocks unless you are investing for the long haul), nothing has fundamentally changed that should cause you to pull your money out of stocks and put it somewhere safe (such as a Treasury note yielding 0.7 percent??).\u00a0 Most of those who pulled their money out of stocks during the 2007-2009 Great Recession missed out on the long bull market that followed, during which the average stock rose nearly five-fold<\/em>.\u00a0 \u00a0The instinct to run to safety can do far more financial damage than the bear market itself.\u00a0 <\/p>\n\n\n\n

The best advice for most people is to take a deep breath and\u2026 do nothing.<\/p><\/blockquote>\n\n\n\n

A little historical perspective may help to keep your focus\non the long-term picture.  Market corrections\n(declines of 10% or more in a major stock index, such as the S&P 500) are a\nregular (although not predictable) characteristic of the stock market.  Since World War II, there have been 26 market\ncorrections in the US, with an average stock value decline of 13.7%.  The corrections typically lasted about four\nmonths, and full recovery took another four months.  Bear markets (declines of 20% or more) are\nless frequent but more severe.  In the 12\nbear markets since WW II, stocks have declined an average of 32.5% over an\naverage of 14 months, with recovery taking another two years.  In the most recent bear market, from October\n2007 to March 2009, the value of the S&P 500 dropped 57%, recovering in four\nyears.  In late 2018, we came within a\nwhisker of another bear market.  Some \u2013\nbut by no means all \u2013 bear markets were accompanied by a recession (two or more\nquarters of contraction) in the real economy. <\/p>\n\n\n\n

While this is certainly a lot of negative movement in the stock market, the overall trajectory is actually up \u2013 returns on stocks over the last hundred years are about 10% per year (7% after inflation), despite the fairly frequent downdrafts.\u00a0 To realize these long-term gains, though, you have to weather a lot of volatility.\u00a0 The graphic below shows the long-term increase in stock market value over the last 70 years, despite all the bear markets and recessions along the way. <\/p>\n\n\n\n

\"\"<\/a>
Source: Doug Short, Advisor Perspectives<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

You likely knew all this already.\u00a0 The only problem is, it\u2019s different when the volatility is causing your<\/em> hard-earned savings to disappear before your eyes.\u00a0 <\/p>\n\n\n\n

What if it gets worse?<\/h5>\n\n\n\n

What if the current correction is just the beginning?\u00a0 Wouldn\u2019t it be smarter to cut your losses and get out now?\u00a0 Probably not.\u00a0 Most corrections and bear markets occur for a reason.\u00a0 During such times, there are plenty of financial gurus pointing out the negative forces weighing on the market and the economy, and providing advice consistent with the current gloomy outlook.\u00a0 The virus is still spreading and will bring the world economy to its knees.\u00a0 The stock market is overvalued and ripe for just such a trigger to bring on a bear market.\u00a0 The virus is the last straw that, added to trade wars and massive refugee movements, will bring on the recession that we all know is overdue.\u00a0 The arguments are usually plausible, and the dire predictions may indeed come to pass.\u00a0 But if you look around, you\u2019ll find a roughly equal number of experts suggesting that \u201cexcess valuation\u201d has been wrung out of the market and this might be a good time to \u201cbuy on a market dip.\u201d\u00a0 The truth is, nobody really knows whether the market is going to go down further or bounce back.\u00a0 \u00a0\u00a0<\/p>\n\n\n\n

Suppose you\u2019re lucky or clever enough to get out at the right time.\u00a0 How will you know when to jump back in?\u00a0 How likely is it that, having managed to protect your savings from the ravages of the Great Recession, you would have the vision and steely resolve necessary to buy back in in March of 2009, with the financial system on life support, unemployment at 10%, mortgages under water everywhere, and the Dow at 6500 \u2013 less than half its value of a year and a half earlier?\u00a0 Trying to time the market is a fool\u2019s errand, which is why the best advisers recommend that you create a financial strategy and then stick with it.\u00a0 It\u2019s deceptively straightforward, but can be hard to do when all is doom and gloom around you.\u00a0 \u00a0Still, it\u2019s good advice.\u00a0 Take it from these investing luminaries:<\/p>\n\n\n\n

\u201cWise investors won\u2019t try to outsmart the market. They\u2019ll buy index funds for the long term, and they\u2019ll diversify.\u201d\u00a0<\/p>— John C. Bogle<\/cite><\/blockquote>\n\n\n\n

\u201cAbsent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they\u2019re going to be higher or lower in two or three years, you might as well flip a coin.\u201d\u00a0 <\/p>— Peter Lynch<\/cite><\/blockquote>\n\n\n\n

“For most of us, trying to beat the market leads to disastrous results… our actions lead to much lower returns than can be achieved by just staying in the market.”<\/p>— Jeremy Siegel<\/cite><\/blockquote>\n\n\n\n

\u201cThe only value of stock forecasters is to make fortune-tellers look good.\u201d\u00a0 <\/p>— Warren Buffet<\/cite><\/blockquote>\n\n\n\n

Isn’t there anything I can do?<\/h5>\n\n\n\n

Is there really nothing to be done when the market plummets and takes a chunk of your nest egg down with it?\u00a0 I do have a few suggestions.\u00a0 First, try to avoid checking your account balances frequently when markets are in turmoil.\u00a0 Watching the train wreck happen in real time will only increase your anxiety.\u00a0 Behavioral finance tells us that losses and gains are not emotionally equivalent; losses inflict more pain than gains provide pleasure.\u00a0 Distract yourself by taking a hike or reading a good book.\u00a0 <\/p>\n\n\n\n

Second, if you have a target portfolio allocation and recent market gyrations have taken your holdings significantly astray (say, you desire a 60\/40 stock\/bond split and recent events have taken you to 50\/50), it\u2019s reasonable to think about making adjustments to get yourself back to your desired state.\u00a0 \u00a0\u00a0It\u2019s best to have a strategy for when and how you rebalance \u2013 usually either (1) a set time (say, once a year in late December), or (2) whenever your portfolio deviates from your desired state by more than a certain percentage.\u00a0 Don\u2019t start making ad hoc<\/em> portfolio moves, and don\u2019t do anything if you\u2019re feeling panicked.\u00a0 Just take a deep breath and wait until you\u2019re calmer.\u00a0 <\/p>\n\n\n\n

Finally, if a market correction makes you anxious enough that you\u2019re losing sleep, it might be time to re-evaluate whether your portfolio allocation is appropriate for your age, temperament, and circumstances.\u00a0 Try this thought experiment: imagine the stock portion of your portfolio losing half its value (roughly what happened in 2007-2009).\u00a0 For example, a 50\/50 portfolio would go down in value by 25%.\u00a0 How would you feel? Would you become despondent or depressed?\u00a0 Would you worry about running out of money in retirement or needing to make big changes in your standard of living?\u00a0 If the answer is yes, it may be time to reconsider how much of your portfolio is devoted to stocks.\u00a0 While you likely need some equity exposure for growth, you might be happier with less than you\u2019ve got.\u00a0 \u00a0But again \u2013 don\u2019t make any big changes under stress.\u00a0 Think it over, discuss it with your partner, talk to a financial adviser if you have one you trust, and review your financial plan. Run some numbers through financial calculators to see how robust your strategy is.\u00a0 Wait until your serenity returns before making significant portfolio adjustments.\u00a0 (If you don\u2019t have a financial plan or a investment strategy, it\u2019s time to create them.\u00a0 You\u2019ll feel much better when you have.\u00a0 You can get started with this post<\/a><\/em>.) <\/p>\n\n\n\n

So, what should you do in a market correction?  Stay cool, keep your eye on the big picture,\nand don\u2019t shoot yourself in the foot by making ill-considered moves to \u2018protect\u2019\nyour investments.  Oh, and don\u2019t forget\nto wash your hands frequently.<\/p>\n\n\n\n

References<\/strong><\/p>\n\n\n\n

Franck, Thomas.\u00a0 (2020, Feb. 27).\u00a0 \u201cHere\u2019s how long stock market corrections last and how bad they can get,\u201d CNBC.com.<\/em><\/a><\/p>\n\n\n\n

Hinman, Keith. (2019, Oct. 8). Create Your Own Retirement Plan: the Eightfold Path, retirementhangout.com<\/em>.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

As I write this post, the Dow Jones Industrial Average has just dropped 1,000 points \u2013 the sixth 1,000 point move in the last 12 days.  The Dow and the S&P 500 are 13% below their most recent high, well into correction territory.  The interest rate on 10-year Treasuries, a safe haven in times of market turmoil, has dropped to a record low 0.7% — substantially less than inflation and only slightly better than stuffing your money in a mattress.  (The interest rate on Treasuries, as with all bonds, is inversely related to its price.  As panicky buyers bid up the price, the corresponding interest rate is driven down.)   The Fed just announced a \u00bd percentage point cut in the interest rate it charges banks \u2013 an emergency stimulus that, thus far, appears to have had little effect.  Why is the stock market taking a nose dive? What\u2019s causing all this sturm und drang?\u00a0 The coronavirus, aka COVID-19, is the culprit for the current swoon.\u00a0 With over 100,000 cases and 3,000 deaths in multiple countries (the vast majority in China), this new (to humans) virus is bidding fair to become the next worldwide pandemic.\u00a0 After about a month of watching China struggle to contain the virus, cases began cropping up in South Korea, Japan, Iran, Italy and elsewhere.\u00a0 The world realized that this virus was becoming a true worldwide scourge.\u00a0 The stock market reacted accordingly, beginning a series of dizzying gyrations \u2013 mostly free falls, but also some up days when relative optimism made a brief comeback.\u00a0 Why should the coronavirus affect the stock market?\u00a0 A certain amount of the reaction is simply fear and uncertainty about how severe the virus\u2019s impacts will be and how long they will last.\u00a0 But real economic effects are also starting to be seen: airline traffic and other travel have dropped precipitously, factories are shuttered and workers furloughed (at least in China). Big companies like Apple have warned that their supply chains have been disrupted and their production and profits will suffer in the months ahead.\u00a0 Schools are closing down or going online, restaurant traffic is plummeting, and those who can are working from home.\u00a0 Increasingly, people are canceling travel plans, avoiding public places, and hunkering down.\u00a0 \u00a0Some economists are predicting a recession.\u00a0 It\u2019s no wonder the stock market reflects these worries. To anyone who has a significant amount of money invested in stocks, this sudden market downdraft is unsettling, to say the least.  If you\u2019re in retirement, or close to it, it could cause anxiety or even outright panic, as you watch your hard-earned savings go up in a puff of smoke and, perhaps, your dreams of a comfortable retirement threatened.  So \u2013 what should you do? What can you do? The best advice for most people is to take a deep breath and\u2026 do nothing.\u00a0 It\u2019s never a good idea to make significant financial moves while feeling pressured or panicky.\u00a0 If you had a well considered long-term investment strategy before the sudden correction happened (and you shouldn\u2019t be holding stocks unless you are investing for the long haul), nothing has fundamentally changed that should cause you to pull your money out of stocks and put it somewhere safe (such as a Treasury note yielding 0.7 percent??).\u00a0 Most of those who pulled their money out of stocks during the 2007-2009 Great Recession missed out on the long bull market that followed, during which the average stock rose nearly five-fold.\u00a0 \u00a0The instinct to run to safety can do far more financial damage than the bear market itself.\u00a0 The best advice for most people is to take a deep breath and\u2026 do nothing. A little historical perspective may help to keep your focus on the long-term picture.  Market corrections (declines of 10% or more in a major stock index, such as the S&P 500) are a regular (although not predictable) characteristic of the stock market.  Since World War II, there have been 26 market corrections in the US, with an average stock value decline of 13.7%.  The corrections typically lasted about four months, and full recovery took another four months.  Bear markets (declines of 20% or more) are less frequent but more severe.  In the 12 bear markets since WW II, stocks have declined an average of 32.5% over an average of 14 months, with recovery taking another two years.  In the most recent bear market, from October 2007 to March 2009, the value of the S&P 500 dropped 57%, recovering in four years.  In late 2018, we came within a whisker of another bear market.  Some \u2013 but by no means all \u2013 bear markets were accompanied by a recession (two or more quarters of contraction) in the real economy. While this is certainly a lot of negative movement in the stock market, the overall trajectory is actually up \u2013 returns on stocks over the last hundred years are about 10% per year (7% after inflation), despite the fairly frequent downdrafts.\u00a0 To realize these long-term gains, though, you have to weather a lot of volatility.\u00a0 The graphic below shows the long-term increase in stock market value over the last 70 years, despite all the bear markets and recessions along the way. You likely knew all this already.\u00a0 The only problem is, it\u2019s different when the volatility is causing your hard-earned savings to disappear before your eyes.\u00a0 What if it gets worse? What if the current correction is just the beginning?\u00a0 Wouldn\u2019t it be smarter to cut your losses and get out now?\u00a0 Probably not.\u00a0 Most corrections and bear markets occur for a reason.\u00a0 During such times, there are plenty of financial gurus pointing out the negative forces weighing on the market and the economy, and providing advice consistent with the current gloomy outlook.\u00a0 The virus is still spreading and will bring the world economy to its knees.\u00a0 The stock market is overvalued and ripe for just such a trigger to bring on a bear market.\u00a0 The virus is the last straw that, added to trade wars and massive refugee movements, will bring on the recession that we all know is overdue.\u00a0 The arguments are usually plausible, and the dire predictions may indeed come to pass.\u00a0 But if you look around, you\u2019ll find a roughly equal number of experts suggesting that \u201cexcess valuation\u201d has been wrung out of the market and this might be a good time to \u201cbuy on a market dip.\u201d\u00a0 The truth is, nobody really knows whether the market is going to go down further or bounce back.\u00a0 \u00a0\u00a0 Suppose you\u2019re lucky or clever enough to get out at the right time.\u00a0 How will you know when to jump back in?\u00a0 How likely is it that, having managed to protect your savings from the ravages of the Great Recession, you would have the vision and steely resolve necessary to buy back in in March of 2009, with the financial system on life support, unemployment at 10%, mortgages under water everywhere, and the Dow at 6500 \u2013 less than half its value of a year and a half earlier?\u00a0 Trying to time the market is a fool\u2019s errand, which is why the best advisers recommend that you create a financial strategy and then stick with it.\u00a0 It\u2019s deceptively straightforward, but can be hard to do when all is doom and gloom around you.\u00a0 \u00a0Still, it\u2019s good advice.\u00a0 Take it from these investing luminaries: \u201cWise investors won\u2019t try to outsmart the market. They\u2019ll buy index funds for the long term, and they\u2019ll diversify.\u201d\u00a0 — John C. Bogle \u201cAbsent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they\u2019re going to be higher or lower in two or three years, you might as well flip a coin.\u201d\u00a0 — Peter Lynch “For most of us, trying to beat the market leads to disastrous results… our actions lead to much lower returns than can be achieved by just staying in the market.” — Jeremy Siegel \u201cThe only value of stock forecasters is to make fortune-tellers look good.\u201d\u00a0 — Warren Buffet Isn’t there anything I can do? Is there really nothing to be done when the market plummets and takes a chunk of your nest egg down with it?\u00a0 I do have a few suggestions.\u00a0 First, try to avoid checking your account balances frequently when markets are in turmoil.\u00a0 Watching the train wreck happen in real time will only increase your anxiety.\u00a0 Behavioral finance tells us that losses and gains are not emotionally equivalent; losses inflict more pain than gains provide pleasure.\u00a0 Distract yourself by taking a hike or reading a good book.\u00a0 Second, if you have a target portfolio allocation and recent market gyrations have taken your holdings significantly astray (say, you desire a 60\/40 stock\/bond split and recent events have taken you to 50\/50), it\u2019s reasonable to think about making adjustments to get yourself back to your desired state.\u00a0 \u00a0\u00a0It\u2019s best to have a strategy for when and how you rebalance \u2013 usually either (1) a set time (say, once a year in late December), or (2) whenever your portfolio deviates from your desired state by more than a certain percentage.\u00a0 Don\u2019t start making ad hoc portfolio moves, and don\u2019t do anything if you\u2019re feeling panicked.\u00a0 Just take a deep breath and wait until you\u2019re calmer.\u00a0 Finally, if a market correction makes you anxious enough that you\u2019re losing sleep, it might be time to re-evaluate whether your portfolio allocation is appropriate for your age, temperament, and circumstances.\u00a0 Try this thought experiment: imagine the stock portion of your portfolio losing half its value (roughly what happened in 2007-2009).\u00a0 For example, a 50\/50 portfolio would go down in value by 25%.\u00a0 How would you feel? Would you become despondent or depressed?\u00a0 Would you worry about running out of money in retirement or needing to make big changes in your standard of living?\u00a0 If the answer is yes, it may be time to reconsider how much of your portfolio is devoted to stocks.\u00a0 While you likely need some equity exposure for growth, you might be happier with less than you\u2019ve got.\u00a0 \u00a0But again \u2013 don\u2019t make any big changes under stress.\u00a0 Think it over, discuss it with your partner, talk to a financial adviser if you have one you trust, and review your financial plan. Run some numbers through financial calculators to see how robust your strategy is.\u00a0 Wait until your serenity returns before making significant portfolio adjustments.\u00a0 (If you don\u2019t have a financial plan or a investment strategy, it\u2019s time to create them.\u00a0 You\u2019ll feel much better when you have.\u00a0 You can get started with this post.) So, what should you do in a market correction?  Stay cool, keep your eye on the big picture, and don\u2019t shoot yourself in the foot by making ill-considered moves to \u2018protect\u2019 your investments.  Oh, and don\u2019t forget to wash your hands frequently. References Franck, Thomas.\u00a0 (2020, Feb. 27).\u00a0 \u201cHere\u2019s how long stock market corrections last and how bad they can get,\u201d CNBC.com. Hinman, Keith. (2019, Oct. 8). Create Your Own Retirement Plan: the Eightfold Path, retirementhangout.com.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[76,80,75,14,78,79,5,74,77],"class_list":["post-896","post","type-post","status-publish","format-standard","hentry","category-retirement-planning","tag-bear-markets","tag-buy-and-hold","tag-corrections","tag-financial-planning","tag-john-c-bogle","tag-peter-lynch","tag-retirement-planning","tag-stock-market-crash","tag-warren-buffet"],"yoast_head":"\nThe Market Just Crashed! What Should I Do? - Retirement Hangout<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Market Just Crashed! What Should I Do? - Retirement Hangout\" \/>\n<meta property=\"og:description\" content=\"As I write this post, the Dow Jones Industrial Average has just dropped 1,000 points \u2013 the sixth 1,000 point move in the last 12 days.  The Dow and the S&P 500 are 13% below their most recent high, well into correction territory.  The interest rate on 10-year Treasuries, a safe haven in times of market turmoil, has dropped to a record low 0.7% — substantially less than inflation and only slightly better than stuffing your money in a mattress.  (The interest rate on Treasuries, as with all bonds, is inversely related to its price.  As panicky buyers bid up the price, the corresponding interest rate is driven down.)   The Fed just announced a \u00bd percentage point cut in the interest rate it charges banks \u2013 an emergency stimulus that, thus far, appears to have had little effect.  Why is the stock market taking a nose dive? What\u2019s causing all this sturm und drang?\u00a0 The coronavirus, aka COVID-19, is the culprit for the current swoon.\u00a0 With over 100,000 cases and 3,000 deaths in multiple countries (the vast majority in China), this new (to humans) virus is bidding fair to become the next worldwide pandemic.\u00a0 After about a month of watching China struggle to contain the virus, cases began cropping up in South Korea, Japan, Iran, Italy and elsewhere.\u00a0 The world realized that this virus was becoming a true worldwide scourge.\u00a0 The stock market reacted accordingly, beginning a series of dizzying gyrations \u2013 mostly free falls, but also some up days when relative optimism made a brief comeback.\u00a0 Why should the coronavirus affect the stock market?\u00a0 A certain amount of the reaction is simply fear and uncertainty about how severe the virus\u2019s impacts will be and how long they will last.\u00a0 But real economic effects are also starting to be seen: airline traffic and other travel have dropped precipitously, factories are shuttered and workers furloughed (at least in China). Big companies like Apple have warned that their supply chains have been disrupted and their production and profits will suffer in the months ahead.\u00a0 Schools are closing down or going online, restaurant traffic is plummeting, and those who can are working from home.\u00a0 Increasingly, people are canceling travel plans, avoiding public places, and hunkering down.\u00a0 \u00a0Some economists are predicting a recession.\u00a0 It\u2019s no wonder the stock market reflects these worries. To anyone who has a significant amount of money invested in stocks, this sudden market downdraft is unsettling, to say the least.  If you\u2019re in retirement, or close to it, it could cause anxiety or even outright panic, as you watch your hard-earned savings go up in a puff of smoke and, perhaps, your dreams of a comfortable retirement threatened.  So \u2013 what should you do? What can you do? The best advice for most people is to take a deep breath and\u2026 do nothing.\u00a0 It\u2019s never a good idea to make significant financial moves while feeling pressured or panicky.\u00a0 If you had a well considered long-term investment strategy before the sudden correction happened (and you shouldn\u2019t be holding stocks unless you are investing for the long haul), nothing has fundamentally changed that should cause you to pull your money out of stocks and put it somewhere safe (such as a Treasury note yielding 0.7 percent??).\u00a0 Most of those who pulled their money out of stocks during the 2007-2009 Great Recession missed out on the long bull market that followed, during which the average stock rose nearly five-fold.\u00a0 \u00a0The instinct to run to safety can do far more financial damage than the bear market itself.\u00a0 The best advice for most people is to take a deep breath and\u2026 do nothing. A little historical perspective may help to keep your focus on the long-term picture.  Market corrections (declines of 10% or more in a major stock index, such as the S&P 500) are a regular (although not predictable) characteristic of the stock market.  Since World War II, there have been 26 market corrections in the US, with an average stock value decline of 13.7%.  The corrections typically lasted about four months, and full recovery took another four months.  Bear markets (declines of 20% or more) are less frequent but more severe.  In the 12 bear markets since WW II, stocks have declined an average of 32.5% over an average of 14 months, with recovery taking another two years.  In the most recent bear market, from October 2007 to March 2009, the value of the S&P 500 dropped 57%, recovering in four years.  In late 2018, we came within a whisker of another bear market.  Some \u2013 but by no means all \u2013 bear markets were accompanied by a recession (two or more quarters of contraction) in the real economy. While this is certainly a lot of negative movement in the stock market, the overall trajectory is actually up \u2013 returns on stocks over the last hundred years are about 10% per year (7% after inflation), despite the fairly frequent downdrafts.\u00a0 To realize these long-term gains, though, you have to weather a lot of volatility.\u00a0 The graphic below shows the long-term increase in stock market value over the last 70 years, despite all the bear markets and recessions along the way. You likely knew all this already.\u00a0 The only problem is, it\u2019s different when the volatility is causing your hard-earned savings to disappear before your eyes.\u00a0 What if it gets worse? What if the current correction is just the beginning?\u00a0 Wouldn\u2019t it be smarter to cut your losses and get out now?\u00a0 Probably not.\u00a0 Most corrections and bear markets occur for a reason.\u00a0 During such times, there are plenty of financial gurus pointing out the negative forces weighing on the market and the economy, and providing advice consistent with the current gloomy outlook.\u00a0 The virus is still spreading and will bring the world economy to its knees.\u00a0 The stock market is overvalued and ripe for just such a trigger to bring on a bear market.\u00a0 The virus is the last straw that, added to trade wars and massive refugee movements, will bring on the recession that we all know is overdue.\u00a0 The arguments are usually plausible, and the dire predictions may indeed come to pass.\u00a0 But if you look around, you\u2019ll find a roughly equal number of experts suggesting that \u201cexcess valuation\u201d has been wrung out of the market and this might be a good time to \u201cbuy on a market dip.\u201d\u00a0 The truth is, nobody really knows whether the market is going to go down further or bounce back.\u00a0 \u00a0\u00a0 Suppose you\u2019re lucky or clever enough to get out at the right time.\u00a0 How will you know when to jump back in?\u00a0 How likely is it that, having managed to protect your savings from the ravages of the Great Recession, you would have the vision and steely resolve necessary to buy back in in March of 2009, with the financial system on life support, unemployment at 10%, mortgages under water everywhere, and the Dow at 6500 \u2013 less than half its value of a year and a half earlier?\u00a0 Trying to time the market is a fool\u2019s errand, which is why the best advisers recommend that you create a financial strategy and then stick with it.\u00a0 It\u2019s deceptively straightforward, but can be hard to do when all is doom and gloom around you.\u00a0 \u00a0Still, it\u2019s good advice.\u00a0 Take it from these investing luminaries: \u201cWise investors won\u2019t try to outsmart the market. They\u2019ll buy index funds for the long term, and they\u2019ll diversify.\u201d\u00a0 — John C. Bogle \u201cAbsent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they\u2019re going to be higher or lower in two or three years, you might as well flip a coin.\u201d\u00a0 — Peter Lynch “For most of us, trying to beat the market leads to disastrous results… our actions lead to much lower returns than can be achieved by just staying in the market.” — Jeremy Siegel \u201cThe only value of stock forecasters is to make fortune-tellers look good.\u201d\u00a0 — Warren Buffet Isn’t there anything I can do? Is there really nothing to be done when the market plummets and takes a chunk of your nest egg down with it?\u00a0 I do have a few suggestions.\u00a0 First, try to avoid checking your account balances frequently when markets are in turmoil.\u00a0 Watching the train wreck happen in real time will only increase your anxiety.\u00a0 Behavioral finance tells us that losses and gains are not emotionally equivalent; losses inflict more pain than gains provide pleasure.\u00a0 Distract yourself by taking a hike or reading a good book.\u00a0 Second, if you have a target portfolio allocation and recent market gyrations have taken your holdings significantly astray (say, you desire a 60\/40 stock\/bond split and recent events have taken you to 50\/50), it\u2019s reasonable to think about making adjustments to get yourself back to your desired state.\u00a0 \u00a0\u00a0It\u2019s best to have a strategy for when and how you rebalance \u2013 usually either (1) a set time (say, once a year in late December), or (2) whenever your portfolio deviates from your desired state by more than a certain percentage.\u00a0 Don\u2019t start making ad hoc portfolio moves, and don\u2019t do anything if you\u2019re feeling panicked.\u00a0 Just take a deep breath and wait until you\u2019re calmer.\u00a0 Finally, if a market correction makes you anxious enough that you\u2019re losing sleep, it might be time to re-evaluate whether your portfolio allocation is appropriate for your age, temperament, and circumstances.\u00a0 Try this thought experiment: imagine the stock portion of your portfolio losing half its value (roughly what happened in 2007-2009).\u00a0 For example, a 50\/50 portfolio would go down in value by 25%.\u00a0 How would you feel? Would you become despondent or depressed?\u00a0 Would you worry about running out of money in retirement or needing to make big changes in your standard of living?\u00a0 If the answer is yes, it may be time to reconsider how much of your portfolio is devoted to stocks.\u00a0 While you likely need some equity exposure for growth, you might be happier with less than you\u2019ve got.\u00a0 \u00a0But again \u2013 don\u2019t make any big changes under stress.\u00a0 Think it over, discuss it with your partner, talk to a financial adviser if you have one you trust, and review your financial plan. Run some numbers through financial calculators to see how robust your strategy is.\u00a0 Wait until your serenity returns before making significant portfolio adjustments.\u00a0 (If you don\u2019t have a financial plan or a investment strategy, it\u2019s time to create them.\u00a0 You\u2019ll feel much better when you have.\u00a0 You can get started with this post.) So, what should you do in a market correction?  Stay cool, keep your eye on the big picture, and don\u2019t shoot yourself in the foot by making ill-considered moves to \u2018protect\u2019 your investments.  Oh, and don\u2019t forget to wash your hands frequently. References Franck, Thomas.\u00a0 (2020, Feb. 27).\u00a0 \u201cHere\u2019s how long stock market corrections last and how bad they can get,\u201d CNBC.com. Hinman, Keith. (2019, Oct. 8). Create Your Own Retirement Plan: the Eightfold Path, retirementhangout.com.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/\" \/>\n<meta property=\"og:site_name\" content=\"Retirement Hangout\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-08T06:03:25+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg\" \/>\n<meta name=\"author\" content=\"Hangout Host\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Hangout Host\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"9 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/\"},\"author\":{\"name\":\"Hangout Host\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#\\\/schema\\\/person\\\/8c4ae01981f8f32c14283392437fea2a\"},\"headline\":\"The Market Just Crashed! What Should I Do?\",\"datePublished\":\"2020-03-08T06:03:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/\"},\"wordCount\":1868,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#\\\/schema\\\/person\\\/8c4ae01981f8f32c14283392437fea2a\"},\"image\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#primaryimage\"},\"thumbnailUrl\":\"http:\\\/\\\/retirementhangout.com\\\/wp-content\\\/uploads\\\/2020\\\/03\\\/stock-mkt-crash.jpg\",\"keywords\":[\"bear markets\",\"buy and hold\",\"corrections\",\"financial planning\",\"John C. Bogle\",\"Peter Lynch\",\"Retirement planning\",\"stock market crash\",\"Warren Buffet\"],\"articleSection\":[\"Retirement planning\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/\",\"url\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/\",\"name\":\"The Market Just Crashed! What Should I Do? - Retirement Hangout\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#primaryimage\"},\"thumbnailUrl\":\"http:\\\/\\\/retirementhangout.com\\\/wp-content\\\/uploads\\\/2020\\\/03\\\/stock-mkt-crash.jpg\",\"datePublished\":\"2020-03-08T06:03:25+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#primaryimage\",\"url\":\"http:\\\/\\\/retirementhangout.com\\\/wp-content\\\/uploads\\\/2020\\\/03\\\/stock-mkt-crash.jpg\",\"contentUrl\":\"http:\\\/\\\/retirementhangout.com\\\/wp-content\\\/uploads\\\/2020\\\/03\\\/stock-mkt-crash.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/index.php\\\/2020\\\/03\\\/07\\\/the-market-just-crashed-what-should-i-do\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/retirementhangout.com\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The Market Just Crashed! What Should I Do?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#website\",\"url\":\"https:\\\/\\\/retirementhangout.com\\\/\",\"name\":\"Retirement Hangout\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#\\\/schema\\\/person\\\/8c4ae01981f8f32c14283392437fea2a\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/retirementhangout.com\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":[\"Person\",\"Organization\"],\"@id\":\"https:\\\/\\\/retirementhangout.com\\\/#\\\/schema\\\/person\\\/8c4ae01981f8f32c14283392437fea2a\",\"name\":\"Hangout Host\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g\",\"caption\":\"Hangout Host\"},\"logo\":{\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g\"},\"sameAs\":[\"http:\\\/\\\/retirementhangout.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The Market Just Crashed! What Should I Do? - Retirement Hangout","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/","og_locale":"en_US","og_type":"article","og_title":"The Market Just Crashed! What Should I Do? - Retirement Hangout","og_description":"As I write this post, the Dow Jones Industrial Average has just dropped 1,000 points \u2013 the sixth 1,000 point move in the last 12 days.  The Dow and the S&P 500 are 13% below their most recent high, well into correction territory.  The interest rate on 10-year Treasuries, a safe haven in times of market turmoil, has dropped to a record low 0.7% — substantially less than inflation and only slightly better than stuffing your money in a mattress.  (The interest rate on Treasuries, as with all bonds, is inversely related to its price.  As panicky buyers bid up the price, the corresponding interest rate is driven down.)   The Fed just announced a \u00bd percentage point cut in the interest rate it charges banks \u2013 an emergency stimulus that, thus far, appears to have had little effect.  Why is the stock market taking a nose dive? What\u2019s causing all this sturm und drang?\u00a0 The coronavirus, aka COVID-19, is the culprit for the current swoon.\u00a0 With over 100,000 cases and 3,000 deaths in multiple countries (the vast majority in China), this new (to humans) virus is bidding fair to become the next worldwide pandemic.\u00a0 After about a month of watching China struggle to contain the virus, cases began cropping up in South Korea, Japan, Iran, Italy and elsewhere.\u00a0 The world realized that this virus was becoming a true worldwide scourge.\u00a0 The stock market reacted accordingly, beginning a series of dizzying gyrations \u2013 mostly free falls, but also some up days when relative optimism made a brief comeback.\u00a0 Why should the coronavirus affect the stock market?\u00a0 A certain amount of the reaction is simply fear and uncertainty about how severe the virus\u2019s impacts will be and how long they will last.\u00a0 But real economic effects are also starting to be seen: airline traffic and other travel have dropped precipitously, factories are shuttered and workers furloughed (at least in China). Big companies like Apple have warned that their supply chains have been disrupted and their production and profits will suffer in the months ahead.\u00a0 Schools are closing down or going online, restaurant traffic is plummeting, and those who can are working from home.\u00a0 Increasingly, people are canceling travel plans, avoiding public places, and hunkering down.\u00a0 \u00a0Some economists are predicting a recession.\u00a0 It\u2019s no wonder the stock market reflects these worries. To anyone who has a significant amount of money invested in stocks, this sudden market downdraft is unsettling, to say the least.  If you\u2019re in retirement, or close to it, it could cause anxiety or even outright panic, as you watch your hard-earned savings go up in a puff of smoke and, perhaps, your dreams of a comfortable retirement threatened.  So \u2013 what should you do? What can you do? The best advice for most people is to take a deep breath and\u2026 do nothing.\u00a0 It\u2019s never a good idea to make significant financial moves while feeling pressured or panicky.\u00a0 If you had a well considered long-term investment strategy before the sudden correction happened (and you shouldn\u2019t be holding stocks unless you are investing for the long haul), nothing has fundamentally changed that should cause you to pull your money out of stocks and put it somewhere safe (such as a Treasury note yielding 0.7 percent??).\u00a0 Most of those who pulled their money out of stocks during the 2007-2009 Great Recession missed out on the long bull market that followed, during which the average stock rose nearly five-fold.\u00a0 \u00a0The instinct to run to safety can do far more financial damage than the bear market itself.\u00a0 The best advice for most people is to take a deep breath and\u2026 do nothing. A little historical perspective may help to keep your focus on the long-term picture.  Market corrections (declines of 10% or more in a major stock index, such as the S&P 500) are a regular (although not predictable) characteristic of the stock market.  Since World War II, there have been 26 market corrections in the US, with an average stock value decline of 13.7%.  The corrections typically lasted about four months, and full recovery took another four months.  Bear markets (declines of 20% or more) are less frequent but more severe.  In the 12 bear markets since WW II, stocks have declined an average of 32.5% over an average of 14 months, with recovery taking another two years.  In the most recent bear market, from October 2007 to March 2009, the value of the S&P 500 dropped 57%, recovering in four years.  In late 2018, we came within a whisker of another bear market.  Some \u2013 but by no means all \u2013 bear markets were accompanied by a recession (two or more quarters of contraction) in the real economy. While this is certainly a lot of negative movement in the stock market, the overall trajectory is actually up \u2013 returns on stocks over the last hundred years are about 10% per year (7% after inflation), despite the fairly frequent downdrafts.\u00a0 To realize these long-term gains, though, you have to weather a lot of volatility.\u00a0 The graphic below shows the long-term increase in stock market value over the last 70 years, despite all the bear markets and recessions along the way. You likely knew all this already.\u00a0 The only problem is, it\u2019s different when the volatility is causing your hard-earned savings to disappear before your eyes.\u00a0 What if it gets worse? What if the current correction is just the beginning?\u00a0 Wouldn\u2019t it be smarter to cut your losses and get out now?\u00a0 Probably not.\u00a0 Most corrections and bear markets occur for a reason.\u00a0 During such times, there are plenty of financial gurus pointing out the negative forces weighing on the market and the economy, and providing advice consistent with the current gloomy outlook.\u00a0 The virus is still spreading and will bring the world economy to its knees.\u00a0 The stock market is overvalued and ripe for just such a trigger to bring on a bear market.\u00a0 The virus is the last straw that, added to trade wars and massive refugee movements, will bring on the recession that we all know is overdue.\u00a0 The arguments are usually plausible, and the dire predictions may indeed come to pass.\u00a0 But if you look around, you\u2019ll find a roughly equal number of experts suggesting that \u201cexcess valuation\u201d has been wrung out of the market and this might be a good time to \u201cbuy on a market dip.\u201d\u00a0 The truth is, nobody really knows whether the market is going to go down further or bounce back.\u00a0 \u00a0\u00a0 Suppose you\u2019re lucky or clever enough to get out at the right time.\u00a0 How will you know when to jump back in?\u00a0 How likely is it that, having managed to protect your savings from the ravages of the Great Recession, you would have the vision and steely resolve necessary to buy back in in March of 2009, with the financial system on life support, unemployment at 10%, mortgages under water everywhere, and the Dow at 6500 \u2013 less than half its value of a year and a half earlier?\u00a0 Trying to time the market is a fool\u2019s errand, which is why the best advisers recommend that you create a financial strategy and then stick with it.\u00a0 It\u2019s deceptively straightforward, but can be hard to do when all is doom and gloom around you.\u00a0 \u00a0Still, it\u2019s good advice.\u00a0 Take it from these investing luminaries: \u201cWise investors won\u2019t try to outsmart the market. They\u2019ll buy index funds for the long term, and they\u2019ll diversify.\u201d\u00a0 — John C. Bogle \u201cAbsent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they\u2019re going to be higher or lower in two or three years, you might as well flip a coin.\u201d\u00a0 — Peter Lynch “For most of us, trying to beat the market leads to disastrous results… our actions lead to much lower returns than can be achieved by just staying in the market.” — Jeremy Siegel \u201cThe only value of stock forecasters is to make fortune-tellers look good.\u201d\u00a0 — Warren Buffet Isn’t there anything I can do? Is there really nothing to be done when the market plummets and takes a chunk of your nest egg down with it?\u00a0 I do have a few suggestions.\u00a0 First, try to avoid checking your account balances frequently when markets are in turmoil.\u00a0 Watching the train wreck happen in real time will only increase your anxiety.\u00a0 Behavioral finance tells us that losses and gains are not emotionally equivalent; losses inflict more pain than gains provide pleasure.\u00a0 Distract yourself by taking a hike or reading a good book.\u00a0 Second, if you have a target portfolio allocation and recent market gyrations have taken your holdings significantly astray (say, you desire a 60\/40 stock\/bond split and recent events have taken you to 50\/50), it\u2019s reasonable to think about making adjustments to get yourself back to your desired state.\u00a0 \u00a0\u00a0It\u2019s best to have a strategy for when and how you rebalance \u2013 usually either (1) a set time (say, once a year in late December), or (2) whenever your portfolio deviates from your desired state by more than a certain percentage.\u00a0 Don\u2019t start making ad hoc portfolio moves, and don\u2019t do anything if you\u2019re feeling panicked.\u00a0 Just take a deep breath and wait until you\u2019re calmer.\u00a0 Finally, if a market correction makes you anxious enough that you\u2019re losing sleep, it might be time to re-evaluate whether your portfolio allocation is appropriate for your age, temperament, and circumstances.\u00a0 Try this thought experiment: imagine the stock portion of your portfolio losing half its value (roughly what happened in 2007-2009).\u00a0 For example, a 50\/50 portfolio would go down in value by 25%.\u00a0 How would you feel? Would you become despondent or depressed?\u00a0 Would you worry about running out of money in retirement or needing to make big changes in your standard of living?\u00a0 If the answer is yes, it may be time to reconsider how much of your portfolio is devoted to stocks.\u00a0 While you likely need some equity exposure for growth, you might be happier with less than you\u2019ve got.\u00a0 \u00a0But again \u2013 don\u2019t make any big changes under stress.\u00a0 Think it over, discuss it with your partner, talk to a financial adviser if you have one you trust, and review your financial plan. Run some numbers through financial calculators to see how robust your strategy is.\u00a0 Wait until your serenity returns before making significant portfolio adjustments.\u00a0 (If you don\u2019t have a financial plan or a investment strategy, it\u2019s time to create them.\u00a0 You\u2019ll feel much better when you have.\u00a0 You can get started with this post.) So, what should you do in a market correction?  Stay cool, keep your eye on the big picture, and don\u2019t shoot yourself in the foot by making ill-considered moves to \u2018protect\u2019 your investments.  Oh, and don\u2019t forget to wash your hands frequently. References Franck, Thomas.\u00a0 (2020, Feb. 27).\u00a0 \u201cHere\u2019s how long stock market corrections last and how bad they can get,\u201d CNBC.com. Hinman, Keith. (2019, Oct. 8). Create Your Own Retirement Plan: the Eightfold Path, retirementhangout.com.","og_url":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/","og_site_name":"Retirement Hangout","article_published_time":"2020-03-08T06:03:25+00:00","og_image":[{"url":"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg","type":"","width":"","height":""}],"author":"Hangout Host","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Hangout Host","Est. reading time":"9 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#article","isPartOf":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/"},"author":{"name":"Hangout Host","@id":"https:\/\/retirementhangout.com\/#\/schema\/person\/8c4ae01981f8f32c14283392437fea2a"},"headline":"The Market Just Crashed! What Should I Do?","datePublished":"2020-03-08T06:03:25+00:00","mainEntityOfPage":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/"},"wordCount":1868,"commentCount":0,"publisher":{"@id":"https:\/\/retirementhangout.com\/#\/schema\/person\/8c4ae01981f8f32c14283392437fea2a"},"image":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#primaryimage"},"thumbnailUrl":"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg","keywords":["bear markets","buy and hold","corrections","financial planning","John C. Bogle","Peter Lynch","Retirement planning","stock market crash","Warren Buffet"],"articleSection":["Retirement planning"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/","url":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/","name":"The Market Just Crashed! What Should I Do? - Retirement Hangout","isPartOf":{"@id":"https:\/\/retirementhangout.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#primaryimage"},"image":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#primaryimage"},"thumbnailUrl":"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg","datePublished":"2020-03-08T06:03:25+00:00","breadcrumb":{"@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#primaryimage","url":"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg","contentUrl":"http:\/\/retirementhangout.com\/wp-content\/uploads\/2020\/03\/stock-mkt-crash.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/retirementhangout.com\/index.php\/2020\/03\/07\/the-market-just-crashed-what-should-i-do\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/retirementhangout.com\/"},{"@type":"ListItem","position":2,"name":"The Market Just Crashed! What Should I Do?"}]},{"@type":"WebSite","@id":"https:\/\/retirementhangout.com\/#website","url":"https:\/\/retirementhangout.com\/","name":"Retirement Hangout","description":"","publisher":{"@id":"https:\/\/retirementhangout.com\/#\/schema\/person\/8c4ae01981f8f32c14283392437fea2a"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/retirementhangout.com\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":["Person","Organization"],"@id":"https:\/\/retirementhangout.com\/#\/schema\/person\/8c4ae01981f8f32c14283392437fea2a","name":"Hangout Host","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g","caption":"Hangout Host"},"logo":{"@id":"https:\/\/secure.gravatar.com\/avatar\/799085214a1e82ffa5671d285373508c6acc6cf15bfe9547be5ad32b50ca1e29?s=96&d=mm&r=g"},"sameAs":["http:\/\/retirementhangout.com"]}]}},"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/posts\/896","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/comments?post=896"}],"version-history":[{"count":16,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/posts\/896\/revisions"}],"predecessor-version":[{"id":914,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/posts\/896\/revisions\/914"}],"wp:attachment":[{"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/media?parent=896"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/categories?post=896"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/retirementhangout.com\/index.php\/wp-json\/wp\/v2\/tags?post=896"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}