I checked my portfolio a few weeks ago.
Big mistake.
Red. Red. More red. Numbers that were higher a few weeks ago are suddenly lower. My retirement account? Down. My brokerage account? Down. My faith in humanity? Also down. (Okay, not quite that far.)
And I know I’m not the only one feeling it. Every time the market starts tumbling, people panic. It’s a pattern as predictable as the stock market itself: The economy shows signs of weakness, headlines scream “RECESSION FEARS,” and suddenly, investors start thinking about selling.
I get it. Watching your hard-earned money shrink is awful. But before you sit out the market altogether — or worse, hit that “sell” button — let me remind you of something history has proven over and over again:
Every market downturn has been temporary.
Every single one.
And after every single one, the market has not only recovered but gone on to hit new all-time highs. Don’t believe me? Check out this 20-year chart of the S&P 500. You’ll see the same recoveries no matter how far back you go.
So while I understand the fear, I also know the reality: The smartest investors don’t sell when the market drops. They buy.
Now, I’m not talking about buying up individual stocks — some companies don’t survive recessions, and no one can predict with certainty which will come out on top. But if you’re investing in broad market funds like the S&P 500? If you have a long-term time horizon?
History says this is exactly when you should be buying.
Why Your Brain Is Lying to You About This Market Drop
The stock market is supposed to go up, right? That’s what it does. That’s why we invest. So when it starts dropping, even when we know downturns are normal, it still triggers every alarm bell in our brain.
And that’s because our brains are wired to hate losses more than we enjoy gains.
There’s a well-documented psychological phenomenon called loss aversion, which basically means losing $1,000 feels twice as bad as gaining $1,000 feels good. And that’s why watching your portfolio shrink — even temporarily — feels like someone just set fire to your retirement plan.
The instinct to do something kicks in. Maybe you stop investing. Maybe you start selling. Maybe you convince yourself that this time is different — that this crash won’t recover like all the others.
But here’s the reality:
Market crashes are normal. So are recoveries.
And yet, every time the market drops, people panic as if it’s never coming back. But let me show you why that fear has never — not once — been correct.
The Market Has Always Recovered — Even When It Took Years
If you’ve been investing for a while, you’ve already seen this pattern play out before. The market crashes. Everyone panics. Articles with words like “historic downturn” and “worst since [insert scary event here]” flood your news feed.
And then?
The market recovers. Every. Single. Time.
Let’s take a look at some of the worst downturns in history and what happened next:
– 2008 Financial Crisis:The S&P 500 fell by 57%. People thought the financial system was collapsing. But within four years, it had fully recovered.
– Dot-Com Bust (2000): The market plunged 49% as internet stocks crashed and burned. Five years later, it was back at all-time highs.
– COVID-19 Crash (2020): The market nosedived 34% in just a few weeks. But within six months, it had completely recovered — and then kept climbing.
That’s the pattern. Every market crash has been temporary. Every single one.
And not only does the market recover — it goes on to set new record highs. It doesn’t just get back to where it was; it surpasses it.
Now, are there times when recoveries take longer than just a few years? Absolutely.
– After the 1929 crash, the market didn’t reach new highs until 1954 — a full 25 years later. (Granted, that was the worst economic crisis in modern history, with 25% unemployment and a global depression.)
– After the 1973-74 recession, it took about seven years for the market to fully recover.
But here’s the key: Even in these worst-case scenarios, the market did recover.
The lesson? The longer your time horizon, the higher your chances of coming out ahead. Even if a recession drags out, the market has always bounced back stronger.
This is the part that most investors forget in the moment. Yes, bear markets happen. But bull markets last longer.
Since 1950, the average bear market has lasted about 10 months. But the average bull market? Nearly three years.
So when the market is dropping, you have two choices:
1. Panic, sell, and lock in your losses.
2. Stay invested (or better yet, buy more) and ride the inevitable recovery.
One of these strategies has worked 100% of the time throughout history. The other has left people broke.
What Smart Investors Do When the Market Drops
If history tells us the market will recover, then what should you be doing when stocks are tumbling?
Simple: Keep investing.
That’s what the best investors do. Not because they have a crystal ball, but because they understand that downturns are when stocks go on sale.
Think about it — if you walked into a store and saw your favorite thing marked down 30%, would you:
a) Freak out, assume it’s worthless, and refuse to buy it?
b) Stock up while it’s cheap?
Most people would pick B. But when it comes to stocks, the average investor does the opposite. They buy when prices are high (because “the market is doing well!”), then sell when prices are low (because “I don’t want to lose more money!”).
This is why the so-called “dumb money” always underperforms the market. Because instead of riding out the storm, they sell low and buy high — the exact opposite of what works.
So, what should you do instead?
1) Keep Dollar-Cost Averaging
The best way to invest in times like these? Keep buying at regular intervals, no matter what the market is doing.
This strategy — called dollar-cost averaging — means you’re automatically buying more shares when prices are low and fewer when prices are high. Over time, this smooths out the ups and downs and helps you build wealth without trying to time the market (which, by the way, even professionals fail at).
2) Focus on Broad Market Funds, Not Individual Stocks
During recessions, some companies don’t survive. We saw this in 2008. We saw this in 2000. And we’ll see it again.
That’s why I’m not saying you should go out and buy individual stocks right now — because some of them won’t make it.
But if you’re investing in a broad-market fund like SPY (which tracks the S&P 500)? That’s different. The S&P 500 isn’t just a collection of stocks — it’s the 500 largest, most successful companies in the U.S.
When some of those companies fail (and they will), they get removed from the index and replaced with stronger ones. That’s why the S&P 500 has always recovered and kept climbing.
3) Zoom Out
Market drops feel catastrophic in the moment. But if you take a step back and look at a long-term stock chart, you’ll see the truth: Over time, the market goes up. Always.
Even with every crash, every correction, every bear market… the long-term trajectory is up and to the right.
So yes, the market is down right now. But if you’re investing for the long haul, the best thing you can do is ride it out and keep buying.
Because one day, you’ll look back at this moment and realize something: This was a buying opportunity.
This Is the Hardest Part of Investing… But It Pays Off
Right now, the market is down. It might go lower. The headlines will keep screaming. Your portfolio might keep shrinking. And every instinct you have might tell you to panic.
Don’t.
Because this — this right here — is what investing actually looks like. It’s not just about the good times when everything is climbing. It’s about having the discipline to stick with it when things feel bad.
Every past recession, every past crash, every past market panic has given investors the same choice:
Panic, sell, and miss the recovery.
Stay the course (or better yet, buy more) and reap the rewards.
One of these strategies has always worked. The other has never worked.
So if you’re investing in broad market funds with a long-term horizon? You already know the answer. You already know what history says.
Buy the dips. Trust the recovery. Keep going.
Your future self will thank you.
Make the Most of Your Money with Professional Insights
Would you like practical tips and tools to help you navigate today’s economy? Zacks’ free Money Sense newsletter cuts through the jargon and gives you actionable tips to help you save money, slash taxes and build a lasting legacy.
From must-see investment ideas to practical budgeting strategies, Money Sense can help you grow your wealth intelligently. Subscribe today and start achieving your next financial goal! It’s absolutely free to sign up.
Get Money Sense absolutely free >>
This article originally published on Zacks Investment Research (zacks.com).