The Market Is Down. Should I Sell All My Stocks?

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Trader on the floor of the New York Stock Exchange on September 23, 2022 in New York City

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The Balance is here to help you navigate your financial life. To that end, we track the money-related questions you most search on Google so we know what’s on your mind. Here is the answer to one of your most recent inquiries.

The Market Is Down. Should I Sell All My Stocks?

Although individual situations may vary, the average retirement saver should probably stay the course, experts say—but there are safer investments available if you can’t risk riding the ups and downs of the stock market. 

Key Takeaways

  • While it’s tempting to dump stocks when the market is down, experts say that’s usually a bad move for a typical retirement saver. 
  • Stocks usually deliver better returns over long timespans than other types of assets, despite being vulnerable to downturns like the current one. 
  • If you sell when stocks are down, you’ll miss out on the gains you’d get if and when the market recovers. 
  • For more conservative investors, CDs, treasuries, and money market accounts are less risky places to park your money.

There’s no doubt the stock market has taken a beating this year. As of October 3, the S&P 500 stock index was down 23% since the beginning of the year, which hits individual investors hard. If you’re saving for retirement, your account probably has been hammered, especially if you’ve still got decades until you retire. (Retirement investors tend to concentrate less on stocks as they get nearer to retirement, while those further away may have accounts that are heavily weighted toward stocks.) 

By the end of the second quarter of 2022, the average value of a Fidelity 401(k) was down 20% over the previous 12 months, the company said in a report in August.

Stocks have generally fallen due to the Federal Reserve’s string of interest rate hikes, which are intended to slow down the economy and cool inflation by making money harder to borrow. That means consumers aren’t able to borrow for big ticket purchases and companies aren’t able to borrow to invest in their businesses, which in turn impacts the profitability of companies—all of which tends to drag down stock prices and financial markets. 


Rate hikes by central banks in other countries, as well as a slowdown in global growth and diminished earnings outlooks have also contributed to the stock selloff. 

If you’ve taken such a hit to your portfolio, it may be tempting to cut your losses and get out of the stock market completely. But retirement experts say that might be a mistake. 

Many families have been visiting Fidelity investor centers nervous about the recent stock market volatility, said Jennifer Sirois, vice president and branch leader for the Fidelity Investments in Nashua, New Hampshire. 

“We generally don’t recommend investors pull their money out of the stock market as a knee-jerk reaction,” Sirois said in an email. “Markets ebb and flow, so staying the course with investments is typically the best suggestion.”

Why It Pays To Be Patient

There’s a big downside to getting out of stocks: You could miss out on the gains and compound earnings that you’ll get if and when the market goes back up again, experts say. For example, suppose you bought a stock for $50, and in the current market its price is down over 20% at $40. If you sell now, you would lose $10. However, if you wait and the stock price rises to $65, you would make a 30% gain on your initial investment. 

The important thing to understand is that most people cannot successfully time the markets—not even experienced traders. Your best bet is usually to let your investments weather large swings over a long-term investment horizon.

“Vanguard believes that staying the course and maintaining a low-cost, diversified portfolio, built to withstand market fluctuations, is the best approach during market downturns,” said Lauren Wybar, senior financial advisor at Vanguard Personal Advisor Services. “When investors abandon stocks, they may miss out on typical market recoveries that follow and the power of compounding ahead.”

Indeed, most retirement savers are in it for the long-haul—that is, more than 10 years—and the conventional wisdom is to ignore the up-and-down blips, because stocks tend to recover and produce stronger returns than many other assets over time. According a historical analysis of the S&P 500 by the Schwab Center for Financial Research, the average bull market over the past 50 years or so ran for about six years, averaging a cumulative return of over 200%. Meanwhile, the average bear market lasted only 15 months, delivering an average cumulative loss of 38.4%.

But for risk-averse investors, there are approaches that can limit the downside of stock market crashes. Sirois said increasing the proportion of bonds in an investment portfolio is one option, since those tend to go down less than stocks when the market slumps, or targeting stocks that have historically had less volatility. Stocks that tend to exhibit more resilience compared to the broader markets are often called defensive stocks and can be found in sectors such as consumer staples, utilities, or healthcare. 

For those with money to invest who want a safer option, there are alternatives available. They include money markets, CDs, or treasuries, Sirois said. 

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  1. Fidelity. “Fidelity Q2 2022 Retirement Analysis: Even With Market & Economic Uncertainty, Retirement Savers Look Long Term and Continue to Save.”

  2. Charles Schwab. “Stock Market Volatility: Recession Worries Flare.”

  3. Fidelity. “Stocks That Offer Shelter in a Storm.”

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