The stock market saw a heavy sell-off in April as investors pushed the sell button in response to the announcement of US tariffs on most goods from most countries.
The question is, what happens next?
If your crystal ball is working, I'd love to borrow it. It'd be much easier to invest if we knew what was coming up.
But, that's part of the fun of investing – share prices can move up and down in response to various events.
Still, stock market sell-offs can be very unnerving because they can suddenly hit our portfolios. So, how can we worry less about them? I think there are at least three things we can do.
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Stock market sell-offs are common enough to be predictable
Firstly, while we don't know when the next market decline is going to happen, I think it'd be a good idea just to expect that they're going to come along every so often. Taking that attitude could make sell-offs seem less scary. We just don't know when or how big the next one will be.
It could occur next quarter, next year or it could be a few years away.
Share markets don't continually go up every single day forever, but sell-offs aren't forever either, in my view.
Markets have recovered
Living through a market correction may be a worrying thing. But, history is on the side of optimistic investors. While history has shown that share prices do regularly decline, there are also numerous examples of when the stock market has recovered from that pain.
After each of the heavy market declines this century, we've seen an eventual rebound. After the GFC, the COVID-19 crash, the inflation sell-off and the recent tariff volatility, we've seen the S&P/ASX 200 Index (ASX: XJO) eventually climb back to its former level.
While we don't know how long it'll take to recover from the next stock market sell-off – it'll probably take longer than a month – I'm optimistic that shares can return to former heights each time.
Sell-offs can be an opportunity
For me, I get excited when share prices fall because it means I can invest at a much better price than before.
In my view, investing during bear markets allows me to access valuations that haven't been seen for months, if not years.
Warren Buffett, one of the world's greatest ever investors, once explained why some investors think about stock market sell-offs the wrong way. He said:
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
