Stock market crash? What to do? Sell everything?

“Hi MP,

I hope you have a good weekend?

I am writing to you because I need your advice…

Two years ago I discovered your blog which confirmed that my direction towards FIRE (Financial Independence, Retire Early) was the right one, and even that the VT ETF was the best investment to get me there.

Except that these last few days, I see my savings melting like snow in the sun with this latest stock market crash… I know that you have already dealt with this subject in your book, but is it really the same as usual at this time? Have the rules of behaviour of the Swiss investor in times of stock market crisis not changed?

Kind regards,
J.

These days I receive many messages like the one from Mrs. J. above.

At the same time, you have to have a strong heart when you see the vertiginous fall of our favorite VT ETF during these last weeks of the stock market crash:

The stock market crash of May 2022 for the VT ETF

My portfolio is the same as Mrs. J.

It is in no way spared…

I went in a few days from about CHF 360'957 of assets invested in the stock market to… CHF 317'000. That’s a nice drop of about CHF 45'000… It’s Mrs MP who starts to complain 😱

“But what to do in case of a stock market crash with my ETFs?” ask the most junior Swiss investors among us…

My investment strategy during a stock market crisis

A reminder for the newbies: a stock market crash is when the value of a security (ETF or stock) loses several percent of its value in a few days. For example, if you go from a VT ETF share value of 107 USD to 87 USD, well that’s a good example of a stock market crash :)

And my answer of how to react to any stock market crisis is simple:

Stock market crises are cyclical and unpredictable. There have been some in the past (dotcom bubble, subprime, COVID, wars), and there will be others in the future. You need to be prepared for this because your behavior during these crashes will be key to your future financial success as a stock market investor
When a crash comes, you don’t sell. This is the worst time. Because even though all the 24-hour TV stations tell you so, NOBODY knows when the bottom of the dip will be. Not even Warren Buffett… So don’t even try to be smart by selling when it goes down, and buying back when it goes up. It works once when you are lucky, but never several times in a row
If you’re a conservative investor, then you go on your merry way, and you buy regularly (every month or every quarter to optimize your fees) with the same amount of your savings as usual. And you go back to your gardening or reading, which are much more interesting than looking at a graph on a screen
If you’re a Mustachian investor with a rather aggressive risk profile (like me 😉), then you see this stock market crash as a sale period where there’s more supply than demand, and so you buy more stocks than usual if your savings allow it — basically you get ETFs at a discount

And there you have it.

“Is that all? But, uh, really? So I don’t sell anything during a stock market crisis? Never?”

Yes. That’s all. And no, you don’t sell anything. Never.

At least, as long as you follow my long-term stock market investment strategy.

On this blog, we invest by buying and holding our ETFs/shares/bonds/real estate for the next decades. Not for the next few days, months or years. But for the next decades.

Oh yes, and just before you ask me: yes, all crises are different, and yes, the behavior to adopt is always the same. So I’m not going to publish such an article every time the stock market crashes, but only refer you to it next time, with the same 4 bullets list :)

On that note, enjoy this beautiful day!

Header photo credit: Andrea Piacquadio from Pexels