What to Do When Markets Plunge
Play it cool with these five tips.

This January proved to be the worst start to the year for U.S. stocks, with most indexes losing money during the month. And, while the market has moved upwards, the recent correction raises a common concern for many investors: What do I do when markets plunge?
While I don't recommend attempting to guess where the market is going, it's important to have a well thought out game plan should things get ugly. Having a plan will help alleviate stress and enable you to stay committed for the long-term.
Below are my five tips for keeping it cool when markets fall.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Buy More
If your time horizon and risk profile allow for it, a drop in prices could be viewed as an opportunity to add to your investment. As Warren Buffett once said, "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down." Could prices keep falling? Absolutely. If the prospect of prices falling further scares you, consider implementing a dollar cost averaging strategy. Pick a dollar amount and a time period, and make regular contributions to an investment. For example, you might commit to investing $100 on the fifteenth of each month for six months.
The key is to commit to the strategy and not be influenced by where you think things might be going and change your plan mid-cycle. To help lower the temptation, consider automating the process with the help of your financial adviser or custodian.
2. The More You Read, The More You Will Know
I'm not suggesting following daily headlines; instead, educate yourself with books from well-respected authors who can help you become a smarter investor. In my experience, anxiety about money and investing can often be reduced through education. If you're looking for a place to start, I recommend The Behavior Gap by Carl Richards. It's an easy, informative read, great for new or experienced investors and even financial professionals.
3. Do Nothing
During volatile periods, investors often feel inclined to make changes to their portfolios. Taking action gives people the perception of control—even if those actions do not generate positive results. Even though doing nothing during a turbulent time is extremely difficult, it can actually be better than doing something. Don't lose sight of your long-term goals—be patient and do nothing.
4. No News is Good News
While it's important to stay informed, the more you update yourself on market fluctuations, the more volatile it will appear. Remember—no one truly knows what will happen next, nor does your media outlet have insight to your personal financial situation or your goals. Turn off the news (broadcast, online, social media, etc.) and disconnect from the frenzy, at least temporarily.
5. Reassess Your Risk Tolerance
Recent events are a good reminder that markets don't always go up. Use this time to reflect on your behavior over the last couple of months and reassess your tolerance for risk. Were you worried? Did you panic? Did you lose sleep? Perhaps your portfolio is not positioned appropriately. If it is not in line with your tolerance for risk, you might have a harder time holding on during times like these.
Regardless of how you feel when markets plunge, remember you can't predict or control the markets. Have a strategy in place that helps mitigate your risk (and lower your stress levels) and stay focused and committed to your long-term goals.
Taylor Schulte, CFP® is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.
-
Social Security Will Continue Sending Paper Checks Sparingly, Reversing Course
The Social Security Administration has backed off from plans to eliminate paper checks. However, it will only send checks in the mail as a matter of last resort.
-
Ask the Editor — Tax Questions on Four New Tax Deductions
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on four new tax deductions in the "One Big Beautiful Bill."
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
From toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
A Financial Planner's Guide to Unlocking the Power of a 529 Plan
529 plans are still the gold standard for saving for college, especially for affluent families, though they are most effective when combined with other financial tools for a comprehensive strategy.
-
An Investment Strategist Takes a Practical Look at Alternative Investments
Alternatives can play an important role in a portfolio by offering different exposures and goals, but investors should carefully consider their complexity, costs, taxes and liquidity. Here's an alts primer.
-
Ready to Retire? Your Five-Year Business Exit Strategy
If you're a business owner looking to sell and retire, it can take years to complete the process. Use this five-year timeline to prepare and stay on track.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.