Stock market dropping? Find out how to handle your 401k now.

How to Respond When the Stock Market Drops

Watching your retirement savings decrease during a market downturn can be unsettling. It's natural to feel anxious when your investments lose value and the future seems uncertain.

Many investors likely experienced this anxiety on March 3, when stock indexes tumbled due to rising tensions in Iran.

However, selling your investments in a panic goes against key investing principles: buy when prices are low, sell when they’re high, avoid rash decisions, and stick to your strategy.

Here are some essential guidelines to keep in mind during turbulent markets:

Market declines are a good reminder to revisit the basics of investing—one of which is to remain calm and avoid emotional reactions.

Avoid Trying to Predict Market Movements

It can be tempting to sell your stocks when the market is falling, wait for the decline to end, and then reinvest at the bottom.

Experts caution that timing the market is extremely difficult. Deciding exactly when to exit and re-enter the market is a challenge even for professionals.

“Whenever you try to sidestep a downturn, the odds of making a mistake are high,” says Peter Lazaroff, a certified financial planner based in St. Louis. “You have to get two decisions right: when to sell and when to buy back in.”

Kristy Akullian, head of iShares investment strategy for the Americas at BlackRock, points out that some of the worst market days are often followed closely by some of the best. For example, on April 9, 2025, stocks surged after several days of losses during President Donald Trump’s tariff campaign.

“By staying invested, you ensure you’re present for the market’s biggest gains,” says Patrick Means, vice president and branch manager at Schwab in Dallas.

This brings us to the next important point:

Stay Committed to Your Investment Plan

Stock prices can fluctuate sharply, but for those investing with a long-term perspective, the best approach is often to remain patient and avoid reacting to short-term volatility.

According to Schwab, bear markets—periods of declining prices—are typically much shorter than bull markets, which are periods of rising prices. Since 1966, bear markets have lasted about 15 months on average, while bull markets have continued for nearly six years.

Maintaining a consistent investment strategy over time requires discipline. Vanguard lists this as one of its core investing principles, along with setting clear goals, diversifying your portfolio, and keeping costs low.

“You can’t predict market movements, but you can control your own actions by avoiding emotional decisions,” says James Martielli, head of investment and trading services at Vanguard.

Sometimes, Doing Nothing Is Best

Financial advisers emphasize that daily market swings shouldn’t concern long-term investors.

This advice applies broadly: if you’re not investing for the long term, the stock market may not be the right place for your money.

“If you’ll need your funds soon, don’t invest them in stocks,” advises Randy Bruns, a certified financial planner in Naperville, Illinois. “If you won’t need the money for 15 years, stop worrying about short-term volatility.”

Market downturns are often brief, and recessions tend to be shorter than they appear. Those saving for retirement or other long-term goals can typically weather these periods.

“If you have the advantage of being a long-term investor, take it,” says Akullian.

Look for Opportunities to Buy at Lower Prices

While experts discourage impulsive trading, market declines can offer chances to purchase stocks at more attractive prices.

Historically, the stock market has often been considered expensive, so corrections may present rare opportunities for better value.

If you’re concerned about the risks of individual stocks, consider broad index funds, which tend to be less volatile.

Alternatively, you might seek out stocks that are less sensitive to market swings, as Akullian suggests. Some mutual funds and ETFs are designed to reduce volatility, offering more stability than the overall market. BlackRock, for example, provides resources on “minimum volatility” investing.