Will the Stock Market Crash? It Doesn’t Matter as Much as You Might Think | Smart Change: Personal Finance

(Katie Brockman)

It’s been a tough year so far for the stock market, and the past few weeks have been particularly fragile.

After a brief rally in the bear market, the S&P500 has fallen more than 7% since mid-August. The tech-heavy Nasdaq is also down more than 10% during this period, and many investors fear this could be the start of a stock market crash.

It is possible that stock prices will continue to decline and that we are headed for a deeper downturn. But the good news is that it doesn’t matter if the market crashes. Here’s why.

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What History Shows About Stock Market Crashes

No one can predict exactly how the market will behave in the short term. Stock prices can be erratic, and even the experts can’t say for sure what will happen in the weeks or months ahead.

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What we do know, however, is that over the long term, the market is incredibly consistent. And if history shows us anything, it’s that there’s good reason to be optimistic about the future of the market.

Since 1980 alone, the S&P 500 has fallen by at least 10% on 20 occasions. Some of these accidents were also serious. During the Great Recession, for example, the S&P 500 lost nearly 57% of its value at its lowest point. When the dotcom bubble burst in the early 2000s, it fell nearly 50%.

However, the S&P 500 also generated returns of almost 3,600% over the same period. Despite all this volatility, the stock market has an incredible track record of recovering from even the worst crashes.

That’s not to say stock market crashes aren’t nerve-wracking. No one wants to see their portfolio value drop, and those drops can be difficult for even the most experienced investors to bear.

Over time, however, the market is much safer than it looks. Even if a crash is looming, by holding on and staying invested, you can enjoy those long-term gains.

The secret to making money in the stock market

Although it can be daunting, one of the best ways to maximize your income is to keep investing during downturns.

Again, stock market crashes are not easy. But they are one of the best buying opportunities. Stock prices are significantly lower during downturns, which means you can stock up on solid investments at a fraction of the cost.

Then, when the market inevitably rebounds, you will reap the rewards. Case in point: Between 2009 and 2010, during the recovery phase of the Great Recession, the S&P 500 posted returns of almost 70%. If you had invested at the bottom of this downturn, you would likely have made substantial gains in a relatively short time.

It’s not certain that a stock market crash is looming, but the future is not as bleak as it seems. By continuing to invest and keeping a long-term view, it is possible to make a lot of money in the stock market.

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