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Losing Sleep Over Sinking Markets? Advice from a Wall Street Expert…and a Veteran of 2 Major Crashes—Me!

Last week, the market took the worst dive since 1987. Ahhhhh, yes, 1987.  I remember that October day quite well. Black Monday they called it.

I’d been in the market for about a year.  I knew nothing about investing, but I trusted my broker. However, when the market went into free-fall, I went into full blown panic. 

I called my broker, insisted he sell everything. He begged me not to, insisting the market will go back up…it always does.

I didn’t listen. If I’d stayed put, like he instructed, I’d be a lot richer today.

Yet it was a priceless lesson.Ten years later, in 1997, almost to the day, the market crashed again. Only this time I didn’t see disaster. I saw a sale. 

Fast forward to today. I’m not saying you should go on a buying spree. Though it is a sale. But I am imploring you not to sell everything in a panic. Investment decisions, based on emotions, rarely end well.

However,  if your nervous system can’t stand the heat, don’t rush out of the kitchen or do anything rash. Take advice from my favorite financial writer, Jason Zweig,

“If you feel you can calm yourself only by ditching some stocks,” he wrote in last Fridays Wall Street Journal, “sell a fixed amount each month for the next year.” By taking small steps, and automating them, you take the emotion out of the decision.

And if you’re going to sell, sell the losers, he advised. “That will turn some of your losses into cash—and a write-off on your taxes.”

Or, instead of selling, “You could direct your dividends into cash, rather than more shares, for now.”

To give you some perspective, take a look at this chart, sent to me via Therese R. Nicklas, CFP:

 

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I’d love to hear how you’re reacting to this crazy market? Buying? Selling? Waiting and watching? Or frozen in fear? Leave me a comment below.


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Comments & Feedback

  • Ellen Strauss

    Barbara – selling losers for tax benefits helps taxable accounts. If you are selling in a tax deferred account it doesn’t have a tax advantage. It might produce an emotional calm. However you are right – doing nothing to your portfolio is doing something.
    Normally we tell clients to go to the movies – now the directive is to stream from Hulu or Disney+!
    Happy investing.

    • barbara huson

      So great to hear from you Ellen. Yes you are totally right…this only works in a taxable account. And your best advice is to get on Hulu or Disney+. Thanks so much for writing!!!

  • Lisa

    Hello Barbara,

    I think we’ve been overdue for a market crash. Wasn’t the last one around 2007 when Lehman Brothers went under?

    I am waiting and just bought some stock a couple of days ago. Bought Starbucks for $68.71, now they are already worth about $73.88. I think the stock market might go up and down over the next four months, then really shoot up around 18 months later! I’ve only lost a little bit of money on the stock I currently have and I don’t think the market can get much lower at the moment. The lowest it went down was about 37% about a month ago.

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Meet Barbara Huson

When a devastating financial crisis rocked her world, Barbara Huson knew she had to get smart about money… and she did. Now, she wants to empower every women to take charge of their money and take charge of their lives! She’s doing just that with her best-selling books, life changing retreats and private financial coaching.

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