Oblivious Investor: What to Do During a Stock Market Downturn

In 2023, markets soared over 20%. In 2024, they did it again. Investors got complacent. Meanwhile, the return of President Trump to the White House was likely to lead to more market uncertainty. Investors have now had that in droves.

Since peaking in February, stock markets hit a bear market correction on Monday before bouncing higher. That’s one of the fastest moves from bull to bear on record. With stocks in a downturn, investors have a few key things to do now.

First, investors who are uncomfortable with the current market selloff should check their positions.

Some stocks are great in bull markets, but terrible in bear markets. Too many growth stocks could mean worse performance as stocks fall.

So, investors should make sure they own both growth stocks and defensive stocks.

Second, markets will recover in time. We don’t know how long that will take. Or if things will get worse before they get better.

Investors who have some cash on the side may want to move some of that in and take advantage of the selloff in stocks today. Investors also have a few days left to make contributions to retirement accounts for the 2024 tax year.

Meanwhile, in taxable accounts, it may make sense to rebalance a portfolio here. And taking a few losses, while uncomfortable, can mean having a tax-loss for 2025’s taxes.

To see the full checklist of what investors should do in a market downturn, click here.