You did it. You finally moved your money from the safety of your savings account, where it was earning approximately nothing, and you invested it. You bought the ETFs, you set up the automatic transfers. You felt like a certified financial adult.
And then it happened.
You open your phone, and all you see is red. Angry, screaming, downward-trending red. The Dow is down 800 points. The S&P 500 is tumbling. Your portfolio, the one you so carefully built, looks like it just fell down a flight of stairs.
Your first thought? “I’ve made a huge mistake.”
Your second? “I need to sell. Right now. Before it all goes to zero.”
Stop. Breathe. I need you to take your finger off the “sell” button and just breathe with me for a second. What you’re feeling is completely normal. It’s the baptism by fire that every single investor—from Warren Buffett down to the teenager buying fractional shares on their phone—has to go through. But what you do in this moment is what separates the people who build wealth from those who just… try.
The Problem: Your Brain Is Hardwired to Betray You
During a market crash, your brain’s ancient survival instincts kick in. It sees the falling numbers as a direct threat, like a saber-toothed tiger charging at you. It screams: “DANGER! FLEE!” This is a fantastic instinct for avoiding predators, but it’s a terrible one for investing.
This instinct is what financial experts call “loss aversion.” Psychologically, the pain of losing $100 feels twice as powerful as the pleasure of gaining $100. So, when your portfolio drops, your brain doesn’t rationally say, “This is a temporary downturn in the ownership of excellent global companies.” It screams, “GET OUT! SAVE WHAT’S LEFT!”
This emotional reaction is the single greatest destroyer of wealth for beginner investors. And I’m not just saying that.
From the Banker’s Desk: The Most Expensive Mistake I Ever Saw
In my years as a banker, I’ve seen people make all sorts of financial missteps. But nothing—not the fancy cars, not the credit card debt, not the questionable vacation spending—comes close to the wealth-destroying power of a panic sale during a market downturn.
I remember a client in his early 30s during the sharp drop in early 2020. He was smart, had a great job, and had been diligently investing for about two years. He had built up a respectable portfolio of around $50,000. When the market plunged, he called me in a full-blown panic. “I’m out,” he said, his voice tense. “I can’t watch it go down anymore. I’ll get back in when things are ‘safe’ again.”
I advised him against it. I explained that he was about to lock in his losses and that “safe” is usually just another word for “expensive.” He didn’t listen. He sold everything.
Do you know what happened next? The market hit its bottom and began one of the fastest, most ferocious recoveries in history. By the time he felt it was “safe” to get back in, the stocks he had sold were 40-50% higher. Not only did he lock in a $15,000 loss, but he also missed out on over $25,000 in gains in the months that followed. It was a $40,000 mistake born purely from fear. He didn’t just lose money; he lost time, and in investing, time is your most valuable asset.
This is the mistake your brain is begging you to make right now. Our job is to tell it “thanks, but no thanks.”
The Solution: Your “Do Not Panic” Action Plan
So, what should you do when the market is crashing and your insides are screaming? You need a plan. A simple, mechanical checklist that you can follow when your emotions are trying to hijack the controls.
Step 1: Log Out and Go for a Walk
Seriously. The worst thing you can do is stare at the red arrows, refreshing your screen every five minutes. This is called “doomscrolling” your portfolio, and it serves no purpose other than to amplify your anxiety.
Close the app. Turn off the financial news. Go outside, listen to a podcast, call a friend, do anything to get your mind off the short-term noise. Your investment strategy was designed for years and decades, not for hours and minutes. Don’t let one bad afternoon derail a 30-year plan.
Step 2: Revisit Your “Why”
Why did you start investing in the first place? Was it for financial freedom in 10 years? A down payment on a house? To retire with dignity and not have to eat cat food?
Write that reason down on a sticky note and put it on your monitor. A market crash doesn’t change your “why.” In fact, it’s the very thing you need to focus on. You are not buying stocks; you are buying a future of freedom and security. Those things don’t go on sale just because the market is having a bad day.
Step 3: Ask the One Question That Matters
Before you even think about selling, ask yourself this: “Has anything fundamentally changed about the great companies I own?”
If you own a broad market ETF like the S&P 500, you own a piece of Apple, Microsoft, Amazon, and hundreds of other world-class businesses. Does a market downturn mean people will suddenly stop using iPhones? Or that businesses will stop using Microsoft software? No.
The price of these stocks has temporarily gone down, but the value of the underlying businesses is likely still intact. You’re a long-term investor, not a day trader. You care about the value, not the temporary price tag. Remember, the stock market is the only store in the world where, when things go on sale, everyone runs out of the store screaming.
Step 4: Consider the Opportunity (If You Can)
This is the advanced level, but it’s the mindset shift that truly builds wealth. When the market crashes, it means that every great company in your portfolio is now on sale. Every dollar you invest now buys you more ownership than it did a month ago.
If you have a steady income and your emergency fund is secure, a market crash isn’t a crisis—it’s an opportunity. It’s Black Friday for investors. Even if you can only afford your regular, automated investment of $100, that $100 is now working much harder for you. Continuing to buy during a downturn is how you sow the seeds of massive future gains.
You don’t have to be a hero and dump your life savings in. Just stick to your plan. The simple act of not stopping your automated investments during a downturn puts you ahead of 90% of panicking investors.
Your Future Self Will Thank You
Surviving your first market crash is a rite of passage. It’s scary, it’s uncomfortable, and it feels deeply wrong. But by staying the course, by trusting the plan you made when you were calm and rational, and by resisting the primal urge to sell, you are building more than just a portfolio. You are building the discipline and emotional resilience of a true long-term investor.
And years from now, when you look at your portfolio’s growth, you’ll barely even remember this scary red day. But you will remember that you didn’t panic. And that will have made all the difference.
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