En español | When the Dow drops significantly, your stomach tightens, your palms sweat, and you begin to envision yourself living your last days in a cardboard box. With those thoughts dancing in your head, you can do one of two things: You can give in to the panic and make an emotional decision, which you will probably regret. Or you can do something constructive with your time.
Here are six good moves to consider.
1. Go into your bathroom and grasp the edges of the sink with both hands. Look deeply into the mirror and repeat three times: I was ready for this, I can handle this.
Why do you say this? Because bear markets are the price you pay when you invest in equities and angle for returns that you expect to be higher than bonds.
2. Go look at the statements for your bank CDs, or your fixed annuity statements, or your bond funds. They make money when stocks tank. Congratulate yourself for being so smart as to own some.
One thing to do when the stock market slumps: Swap stocks. — Photo by Brendan McDermid/Reuters
3. Swap some of your losing stocks and stock funds. By selling losers, you get to write those losses off against any gains on next year's tax return or even against regular income.
The trick is, don't sell and get out of the market, because you'll never get back in at the right time. Swap the stocks or funds for similar investments. If you own index funds or exchange-traded funds (ETFs), there must be 50 identical securities to swap into.
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