Should You Pull Your Money Out of the Stock Market Right Now?

JTo say this is a difficult time for an investor would be an understatement. With major stock indices down significantly, many people are seeing losses in their portfolios. And if you’re one of them, you might be inclined to ditch your stocks before more damage ensues. But taking your money out of the stock market right now is a decision you might deeply regret.

Why you need to stay the course

At this point, your portfolio may be down 25% or 30% since the start of the year. If so, your logic might be that liquidating your shares now means avoiding a scenario where you are looking at a 40% or 50% loss.

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It is easy to understand this line of thinking. But one thing you need to remember is that any loss you currently see in your portfolio is hypothetical and not real. However, if you go out and sell stocks while they are falling, you will be converting a potential loss into an actual loss – and it’s a move that could hurt you financially for many years to come.

This is why now is really not the time to take money out of the stock market. The only exception is if you have a stock in your portfolio that was performing poorly before this recent downturn. If you don’t have much confidence in its ability to recover, you might be better off taking a loss on that individual stock and using it to your advantage. But generally speaking, you shouldn’t be selling stocks right now.

keep the faith

This certainly isn’t the first time the stock market has crashed, and it likely won’t be the last. But keep in mind that the stock market has a long history of recovering from downturns. If you keep your wallet intact, you may find that in a year your balance will be back to where it was before this recent drop. Or you may find that you are up from where you were at the start of 2022.

Also, if the money in your portfolio is earmarked for a goal like retirement, and you still have 15 to 25 years ahead of you in the job market, there’s no reason to assume that the current downturn will hurt your long-term plans. It may create some temporary discomfort, but if you leave your wallet alone, you’ll prepare to weather this downturn unscathed. If you sell investments out of panic, you risk locking in losses from which you can never fully recover.

Although it may seem counter-intuitive, now is actually a good time to add to your portfolio if you have cash lying around (or the ability to use some of your paycheck for investment purposes). . The fact that the overall market is down means you could be buying quality stocks at a discount. And if you hold them for a long time, you might enjoy them quite well.

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