Stock Market Sell-Off: Do’s and Don’ts

During times of market volatility it’s important to remain calm. Something happens in the world, and well we all seem to panic and sell off parts of our stock portfolios and flee the market.

After the situation has stabilized, however, everyone begins to wonder why they are doing what they are doing and realizes that they have mistimed the market.

Throughout this article, I will share what investors should do or not do in such a situation.

Do research

The main reason people fail to make money from stocks is that they do not research the company before investing.

Investors should conduct research on the company before investing. If you intend to invest in a company, make sure you learn about its fundamentals, financial statements, ratios, management, and more before you invest.

The other thing to remember is that investing is a long-term venture, not a short-term gamble.

Don’t time the market

The most common mistake investors make during a crash is panic selling at a loss and holding cash to buy back in when the market bottoms out.

Unfortunately, predicting the actual bottom is extremely difficult. Crashing markets and bear markets can be long and unpredictable, and they are often accompanied by multiple false rallies known as bull traps.

Many investors who attempt to time the market end up missing the rebound, which can severely hinder their future returns.

By staying the course, investors should commit to holding positions they believe in and committing more capital via dollar-cost averaging if they have the resources.

Turn off the news

The long-time chairman and CEO of Berkshire Hathaway, Warren Buffett is widely recognized as one of the most successful value investors in history.

Buffett says the answer is simple: Try not to worry too much about it. In fact, investors can find great buying opportunities when stocks go on a fire sale when the crowd is panicking and fear is running high.

When he and his team talk about investing, they often mention purchasing stocks and holding them for the long term. Selling to avoid losses and getting back in later can defeat you totally.


The performance of a single asset class will often outperform the performance of a well-diversified portfolio.

Despite this, the outperformance of any single asset class is notoriously difficult to predict. Over the long term, a diversified portfolio is likely to outperform, particularly in risk-adjusted terms.

Diversifying may present some clients with challenging discussions due to its middle-of-the-road performance tendencies; however, diversifying is always the right thing to do.

Consider professional help

The professionals working within a wealth management or trust department of a bank will work with you in determining your risk profile and objectives.

Through personal consultations with you, they will develop a personal profile of your individual investment needs and objectives, time horizon, and attitude toward investing. Then they will set your asset allocation policy.

A personalized asset allocation policy based on your needs and objectives, as identified before. This policy maximizes your investment returns relative to your risk tolerance through the carefully diversified allocation of your portfolio. In addition, when needed they will rebalance your portfolio. Your investment portfolio is carefully monitored on an ongoing basis to ensure that it remains consistent with your agreed-upon asset allocation policy.

If the relative value of investments in your portfolio changes enough to become inconsistent with this policy, it is rebalanced.

Finally, for the fee that you pay, a professional will communicate with you about the investment results. The communication will be on a regular basis and provide a comprehensive reporting package showing performance reports and statements as well as recommendations in regard to your personal financial planning situation.