S&P500 crashes
The S&P500 is an index that represents large-cap stocks in the United States, but it is not always on the rise.
There have been many major downturns, such as the bursting of the IT bubble, the Lehman shock, and the coronavirus shock.
| What happens during a crash | Contents |
|---|---|
| Appraisal value decreases | Unrealized loss |
| News fuels anxiety | Makes me want to sell |
| Pessimism increases on SNS | Policy wavers |
| Makes you want to stop saving | Can't buy when it's cheap |
A crash is not an abnormal situation, but prepare for it as something that happens when investing in stocks.
Things to check before selling
Before selling, check the following four things:
| Confirmation | Contents |
|---|---|
| Purpose | Retirement funds or short-term funds |
| Period | Money that will not be used for more than 10 years |
| Lifestyle defense funds | Do you have enough cash |
| Reserve amount | Is your household finances reasonable |
If you are investing with long-term funds, there is no need to sell just because of a market crash.
On the other hand, if you have money that will be used within a few years, it's a good idea to put too much money into the S&P 500.
Advantages of continuing to save
If you keep saving during a market crash, you may be able to buy at a lower price.
| Benefits of continuation | Contents |
|---|---|
| You can buy cheaply | You can buy many units |
| Habits remain | Hard to be swayed by the market |
| Get into the recovery phase | It's hard to go back if you sell |
However, there is no need to force yourself to continue.
If you are struggling with living expenses, another option is to continue with a lower savings amount.
Cases in which you may consider selling
Even during a market crash, there are times when you may want to consider selling.
| Case | Reason |
|---|---|
| It was money I would use soon | I was taking too much risk |
| I don't have the funds to protect my life | Protecting my family's finances comes first |
| Concentration in the U.S. is not appropriate | Review investment policy |
| It was a high-cost product | Review to a low-cost product |
When selling, consider steps such as stopping savings, reducing the amount, and selling some of the assets, rather than all at once.
summary
When the S&P 500 crashes, whether you should sell immediately or not depends on your investment objectives and when you will use your funds.
If you have surplus funds that will not be used for 10 years or more, you can consider continuing to accumulate funds.
If you have invested money for living expenses or money that will be used soon, you need to reduce the amount invested, increase cash, or reconsider diversification.
The most important thing in the event of a market crash is not to predict market prices, but to create a household budget that allows you to avoid having to sell.