What to do When the Stock Market Dips
When the stock market dips, work smarter, not harder. Handling stock market ups and downs is all about mindset and taking advantage of what’s going on.
The stock market was down pretty much all of 2022. During downturns, it’s the time to buy or hold onto stock. In 2022, I maxed out my $6,000 Roth IRA contribution, and bought stock with that money because I’m investing that money for retirement and won’t take it out for decades.
For my brokerage account, though, my strategy was to hold onto the stock instead of selling it. In 2021, the stock market was POPPIN’! I made a profit of $7,000 in stock because interest rates were low and stocks were overvalued. I used that money to pay my personal credit card off in full, each month (I’m debt free). And to invest in business coaching (I invested almost $30,000 in business coaching in 2021).
In 2022, though, the government raised interest rates, and the stock market corrected itself. Stock prices fell. I don’t depend on my brokerage account for income because I pay myself consistently from my business and I have built my emergency fund.
That’s why, once you have that emergency fund built and you have that leftover cash, that’s when it’s time to start investing. This year I sold off some of the stock that hasn’t been doing well intentionally for a loss of about $560, not because I need the money, but because I want to lower my 2022 tax bill.
My entire net worth portfolio decreased more than $20,000 in just a few months in 2022 because of stock market dips. But I’m not sweating it because my net worth doesn’t define me. I’m not a better or worse person depending on how my stocks are doing. And I’m taking this opportunity to show people to stop being scared and to invest their money, even if it’s literally a dollar.
Inflation has been high lately, even reaching 9% in 2022. This is the rate at which your cash is losing value every year.
If your money is sitting in a savings account, even a high yield savings account, it is still depreciating. You will never get it fully back. However, if you invest it, it will also temporarily go down, but it will go up after some time, because it the long run, the stock market has always gone up.
And by long term, I don’t mean three months. I mean five, ten, fifteen years or more. You must be willing to ride out the storms and ignore the noise when everybody’s losing their sh*t about stock market dips. The news will make it seem like the world is ending and the stock market is going to crash, but that’s just capitalism for you. If you are investing, you are winning.
If you already have a 401(k) or other retirement account, do you know what you are actually investing in?
I recommend checking that out because it’s good to know what your hard earned money is being put into. I’ve unfortunately seen too many people (back in my stockbroker days) that had thousands of dollars just sitting in a retirement account, but not actually invested. Your money must be invested into stocks/mutual funds/etc. and not just sitting in cash in your account.
If you are new to investing and want to learn more about different investment vehicles, check out my “How to Pick Stocks” masterclass.
I will literally walk you through how to build your investment portfolio. You can do it self-managed, where you transfer your money and hand pick the investments to buy and sell yourself.
Or, you can use a robo advisor, where you choose your risk tolerance and retirement goals. It picks investments for you based on your answers. I’ll walk you through the questionnaire so that you can understand why they’re asking you these questions. The goal of the questions is to understand your risk tolerance for when there are stock market dips. Everyone likes the idea of being an aggressive investor when the stock market’s poppin. But your true risk tolerance and understanding of the stock market comes out during the downturns.
You can also do both. I started out with robo advisor when I didn’t know what I was doing. Yhen once I worked in finance, I closed out of the robo advisor and starting self-managing. My client Lulu inherited about $200,000 and they chose to put tens of thousands of dollars in robo advisor account and self managed accounts. Learn more about how they invested their inheritance here.
Investing is a great way to set yourself up for the future. And you can stop stressing about any stock market dips. When you’re ready to become a future millionaire and want more hands on coaching, schedule a call with me today.