Should I Still Invest Even if the Stock Market Keeps Falling?

11 min readMar 26, 2021

Yes. Absolutely. The stock market does fall occasionally. Sometimes it an fall for a long time. It’s part of the process, and it’ll start going up again eventually.

I don’t like seeing the stock market keep falling. Doesn’t that mean I’m losing money?

I bet you don’t. When the stock market falls it makes a lot of people feel scared that they’re losing money. It’s very common. The most common reaction is to start selling, aka panic selling, with hopes that you’ll be able to recoup some of your investment and put a stop to the losses. This is not a good strategy.

Well I won’t keep losing money if I pull out of the stock market. I don’t think investing is meant for me anyways.

Just wait up for a second. If you do decide to sell, you will have lost money. That’s the end of that road. But if you decide not to sell, you’ll still have all of the stocks that you originally bought, and those stocks will have a chance to go up again when the market turns around. You see, stocks can go up in price, but your money won’t. If you sell the stock now, then you’ve basically traded a high value for a low value, and all you’ll have left is cash. That’s a problem because cash doesn’t grow. In fact, it shrinks. Every year, cash loses value because of inflation. Stocks gain value because of growth, production, and innovation. So by selling during a crash, you not only lose the potential value of a stock’s future, you also subject your cash to lose value because of inflation. Remember, you haven’t actually lost money until you sell. Sure, the current value of the stocks might be lower right now, but they’ll recover over time. In fact, the best thing you could do is buy more (assuming you’re investing in a healthy company or a general index tracking ETF).

So how do I know when I’m supposed to sell?

Ah…yeah. About that. It’s hard for me to tell you when it’s the best time to sell stocks. That’s because we all have different situations and specific needs to factor in. Do you need the money right now? Or can you wait a few years? Do you need a little now and a little later? Everyone’s unique situation makes it impossible for someone to say when it’s the best time to sell. If you need the money now, you might have to sell, even if the stocks have fallen since you bought it. This is what caused major issues in 2008 — people didn’t have enough cash to weather the storm. Which means, if you need the money in the short term, investing it isn’t a good idea. As a rule of thumb: the longer you can wait until selling, the higher chance your investments will have gone up in value.

That doesn’t really tell me when to sell?

Right. Ok, generally speaking, there are two reasons to sell. One reason to sell your stocks would be accepting the loss if the company’s outlook is a lost cause. For example, if they are struggling to generate positive revenue, they’re being out-performed by similar companies in the same sector, and/or if they likely won’t be able to pivot and re-identify their business model. Selling a loss in this scenario can also be used to offset any of the taxes you’ll pay on stocks that have gained you money. This is called tax loss harvesting. Another reason to sell a stock is if you have already made a good return on your investment. There’s nothing worse than having a stock go up massively only for you not to sell it at the top and then watch it fall way back down again. This is one of the reasons why it’s practically impossible to time the market. Not only is it hard to say when it’s price is at the bottom, it’s impossible to know when it’s at the top! A more responsible strategy is to have a predetermined exit plan, such as ‘I will sell this stock once I reach 15% profit’, or ‘I will sell this stock if it’s price hits $X.XX’. This ensures that you get some profits, even if you happen to sell before it’s peak. Nobody ever went broke taking home profits.

That seems like way too much work though. I still don’t know when to sell!

You’re absolutely right. It is a lot of work. In fact, no one really knows when to sell. Most people sell when the particular sale of that stock works in favor for them. Perhaps the stock has gone up quite a bit and they want to invest some of the profits into another stock they think might go up. Maybe their stock was a bit of a gamble, and it didn’t work out, so they want to get some of their remaining money back, try another stock, and use the loss for their next year’s taxes. Maybe the person is ready to retire, or wants to buy a home, or needs a substantial amount of money. But all things aside, one of the best strategies is to just buy and hold stocks. Think about it: if you don’t need the money right away, why not let it grow over time? As long as you picked a decent stock to invest in (or you’re investing in an index based ETF), the odds of it being higher in, say 3 years, are astronomical. And in 10 years, it’s almost a certainty. (As long as the company doesn’t bankrupt, for example Blockbuster).

So then how do I know which stock to buy? I mean if they’re gonna go up over time, why don’t I just buy the cheapest one?

It’s a great question, with a simple answer: no one knows which stock is going to be the next Tesla. Some ‘experts’ will speculate, based on detailed research on that particular business’s fundamentals, such as income, revenue, cash flow, CEO/COO, catalyst news, potential mergers, or the speculation of future growth. But rather than trying to find these unicorns, it’s easier to invest in a bundle of companies/stocks. For example, one bundle of stocks is tied to —

What do you mean by a bundle of stocks?

So like instead of spending $1000 on maybe 1/2 of a share of Tesla, you could spend $1000 on a bundle of tech companies, where you’ll get a little bit of Apple, a bit of Netflix, and maybe a small portion of Tesla, etc. So instead of investing all your money into one company, where you ride or die with the company, you diversify your investment so that you can benefit from all of their growth, and then a single company’s struggles won’t ruin your overall investment.

Oh damn that actually sounds pretty good. So like instead of investing in only United Airlines, I could buy some stocks for each of the different airline companies and hope one does really well?

Yeah, exactly. And to take it one step further, you could actually invest in a company whose sole purpose is to invest in all of the different airline companies. Basically, this company’s job is to track the performance of airline travel companies, and you don’t have to worry about buying and selling each stock. All you need to do is to buy the stock of the company that does all of the trading. I know it all sounds kind of complicated. But basically this is what an ETF is, or an Exchange Traded Fund. They’re not technically companies, but rather money management firms that will specialize in a particular industry or sector. So for example, if you wanted to invest in airlines and travel, but you don’t know which particular airline company you want to focus on, you could buy shares of $JETS! This ‘company’ called JETS is an investment firm that tracks the performance of the airline industry. It’s like getting a small sample of everything!

So an ETF is basically a company of other companies?

I guess for a lack of a better term, yes. Essentially, an ETF is a grouping of certain stocks or companies, usually organized based on which sector it’s in. So for example, JETS (great name LOL) deals with the airline and travel sector, while iCLN deals with the clean energy sector. There are probably thousands of different ETFs that track different things, and not always necessarily based on being in the same industry. For example, there’s an ETF that tracks the top 500 companies in the US, regardless if it’s a tech company, or an airline company, or a soda company. If it’s in the top 500, it’s in that ETF. There’s also an ETF that tracks the top 100 tech companies. There are even ETFs that are designed to track obscure things like marijuana sales, restaurant businesses, or even the prices of jewelry. ETF’s are a great way to invest in different things without taking on all the risk of a single company.

What do you mean by the top 500 companies? Who decides those?

I’m stoked you asked this, because it’s probably one of the best investments a beginner can make. The top 500 US companies are determined by a number of factors, such as the company’s net worth, how much money it makes, how much it pays in dividends, etc. It’s basically a list of the top 500 most successful companies right now. It would be pretty smart to invest in the most successful companies, right?

Well yeah, they’re successful for a reason, right? So that’s companies like Apple and Amazon?

Yep, just to name a few. So basically there’s an ETF that tracks all of these top 500 companies, meaning that the price of the ETF is directly related to the performance of these companies. So when the top companies do well, the ETF price goes up, and when they do poorly, the price falls. As you might expect, the top 500 companies do well more often than they do poorly. There are a handful of ETF’s that track these companies, but $SPY & $VOO the benchmarks.

So I should invest in $SPY or $VOO?

Well, I’m not saying yes: put your money in these… I can’t tell you what to invest in. But the history of the stock market is based on these measurements, so when you hear things on the news like ‘the markets are up’ or ‘the market is crashing’ they’re typically referring to this as a general indicator. Over the last 100ish years, the SP500 (those top 500 companies) have given an average return of 10% growth per year. To put this into a better perspective, it takes just over 7 years to double your money at 10% yearly growth.

So…yes? Invest in $SPY and $VOO?

Sure, if you want to invest in a good company but you don’t know which one. You have to be ok with periods of ups and downs knowing that you are in this for the long run. Ultimately, if you aren’t sure where to start, but you know you want to start, then yes. Invest in either SPY or VOO.

What’s the difference?

They basically do the same thing, but have small differences, such as who manages the ETF and how many shares are available. In other words, management fees and liquidity. SPY is managed by the firm called Standard and Poor’s Depositary Receipts (SPDR) and VOO is managed by Vanguard. At the end of the day, they both do the same thing and the difference is minimal. Sometimes one firm will differ from another based on the management fees that are baked into the price, or the liquidity of shares in high volume trading platforms. But that’s not really important right now. I’d say just pick one of them, and then invest what you can month. And try not to get too caught up in the day-to-day activity of the stock market, because there will be times they go down. It’s important to focus on the long run: they will be up in the future, but they might have some ups and downs in the process.

To be continued…

Legal Disclaimers I Must Disclose

The above text is not financial advice, but rather a platform to present educational information on investment strategies. These are questions that I have gotten over the span of the last few months with general questions about investing. I know there is so much information out there that it seems like it’s impossible to find out where to start. This information will hopefully help break the gatekeeping nature of investing. Remember to do your own research. You must take responsibility for your own investments, and I am not giving you investment advice. You must know the consequences of investing can result in a loss of some or all of your initial deposit.

With that being said…

Please, spread the word. Share the knowledge. The more young adults that begin investing for their future, the better. Please leave a comment if you have questions, ideas for a blog, etc., or message me on Instagram @typicalskandinavian.