How to not panic during a stock market crash

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By 02SmithA
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NYSE Trading Floor

The stock market is a very complicated thing. To be successful in the stock market one must keep emotions out of the picture, but during a stock market crash that is much easier said than done. How can you avoid panicking at the worst time?

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

Patience
Long term outlook

Step 1

Don't check too often!

Don't check your stocks TOO often. Sure you want to know how things are doing, but compulsively watching your stocks as they fall can play a tough emotional toll on the mind.
Step 2

Keep a long term perspective no matter how bleak it may look. The stock market has been the best way to build up wealth all through history, but crashes occur so you must be prepared for them. Understand that unless you sell your stocks, you haven't actual lost that money yet.
Step 3

Diversify your nest egg.

Keep a well diversified portfolio of investments. Never have any more than 20% of your portfolio in one particular investment. A well diversified portfolio withstands a stock market crash much better than a highly focused portfolio.
Step 4

Make sure you have some rock solid investments that you can count on. This might be a stock of a particular company that has proven itself immune to economic downturns or a mutual fund that hedges its bets and does well even when the market does poorly.
Step 5

Understand the risks involved when you invest. Investing isn't without significant risks and if you don't know that going in, you shouldn't be putting any of your money into the stock market.