How to React to a Sudden Crash in the Stock Market

When you are an investor, major changes in the stock market can certainly be cause for panic.  Even for the average person, there is a very clear understanding that the status of the stock market is indicative of the status of the economy as a whole.  When the market crashes, financial upheaval is soon to follow.  With this in mind, how do you react to a sudden crash in the market?

When the stock market makes a sudden downward turn, one of the best pieces of advice to follow is to resist the urge to panic right away.  In May of 2010, the market briefly crashed in what turned out to be an error in the pricing of Proctor and Gamble stock.  The error was made by a trader from Citigroup, and the panic that ensure created havoc for days to follow.  The incident served as a strong reminder of why panic is not the best first reaction to a crash.

One thing that you should do in the event of a crash it to take inventory of your assets.  The potential for a crash in the stock market is why all investors should work to diversify their portfolios.  Investments in multiple markets, such as hard assets, stocks, Forex, and more can be the best way to stay protected. 

 

If the stock market starts to experience a crash, it is essential that you stay calm and make wise decisions.  The stock market may indeed experience further decline, but there is also the real possibility that it will see significant increases in the near future.

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