3 Things Not to Do After the Chinese Stock Market News

As news of the Chinese stock market crash hit news outlets around the world, so did a general sense of disease among investors. As with any situation that results in a sudden loss of money, investors were anywhere from disappointed to deeply troubled, depending on how much they lost and how deep their expectations were violated. Today was one of those financial snafus that nobody like but everybody has to deal with, like the price of healthcare in the US, like PPI in England. Nobody likes to look into investment accounts and see lots of digits in the red. But it’s also all part of the plan. It’s important to remind ourselves of this in times like this. If you are invested in the long term, you knew that stock plunges would happen. Here’s how you SHOULD NOT respond today.

  • Don’t Freak Out. There have been many market downturns in the history of the United States. Today we are more related as a global economy than ever before, but the symptoms of economic development are the same, even though they are larger. Economists, particularly those who recommend conservative investment strategies, are urging investors not to hit “Sell” right now. Markets drop. Over and over. Then they recover. The odds that this is the end of civilization are slim to none. The odds that this is a growing pain resulting from a complicated world power are very high. Deal with it and look forward to future growth.
  • Don’t Buy Buy Buy. A sudden economic drop can be compared to a falling knife. Stay out of the way and you’ll be fine. Try to catch it, and one of two things will happen: 1) You’ll get lucky and catch it just right, and 2) You’ll be unlucky and hurt yourself a lot in the process. When stock markets tumble, nobody knows where the end is. Investors hoping to buy low and sell high often jump the gun, buying up a bunch of stock, assuming the price is going to rebound tomorrow. These folks are often dismayed when the stock just continues to tumble. Unless you have a very good reason, don’t buy stock until you’re sure the worst is over.
  • Don’t Do Anything. “Keep Calm, Carry On”. “Stay the Course”. These are investment cliches that anyone familiar with investment is familiar with. If you are deeply invested, you have likely lost a lot of money in the past 24 hours. This doesn’t mean that you long term plan for growth over decades can’t still survive and thrive, global financial speed bumps notwithstanding.

Every time there is a financial crisis, however small, there are people in the media spouting doom and gloom. This is how they make their money. Don’t listen to them. If the whole global market collapses (unlikely) you will have much bigger problems to worry about. If it doesn’t collapse (very likely), you will likely see your losses rebound within months. So chill out, have a drink, and remember better days. Better days are what’s coming again, like they always do.

Photo Credit: Mary Madigan


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