I'm here to tell you that if the stock market crashes, you should still invest in stocks (I will be doing the same). The current volatility is an opportunity for young investors to buy great companies and indices at a huge discount. I want to give you a scenario. Let's say you've had your eyes on a beautiful car selling for $29,999. This car has all the bells and whistles you want. I’m talking heated/cooled leather seats, AC, V6 engine, moon-roof etc. After 9 months of searching and hoping for a better price, you come across a similar car in the exact color you prefer selling at a 50% discount. I'm sure you will jump for joy because you're getting a great deal.
Unfortunately, most investors do not see it that way when it comes to buying stocks. We see a downturn in the market, and we panic. Some of us even sell our stocks and lock in our losses. This is a common mistake with young investors. What's even worse is that we sometimes buy the same stocks later at higher price when the stock market is doing much better (Yikes! Read The Millionaire Next Door). While we are in our wealth accumulation phase, we should rather prefer to buy stocks at a deep discount. This increases our purchasing our power (In essence, you get more bang for your buck). So you should jump for joy when stocks are cheap. Think “discount” when you see “red” in your portfolio.
We all know about the concept of buying low and selling high. However, what we usually don’t think about is the power of compounding. For compounding to work effectively, we have to stay invested for a long period. I'm talking about 10, 20, 30 or even 40 years. This is how I want you to think as an investor. Unless there's been a significant change to your stocks, you don't need to sell. Selling your ownership in a company in hopes of buying it at a lower price is also unwise. Always think long term.
Thanks for reading and as always, stay investing my friends. Please reach out if you have any questions.