What should you do if the stock market falls?

According to Judith Sanders, Investment Strategist at ABN AMRO, it is especially important to remain calm: “We all know this in theory, but it’s not easy when you see a downward trend in your portfolio. Nevertheless, it is an important starting point. Research shows that investors often make choices based on feelings and emotions, which are often irrational and wrong.”

As a self-investor, you have set up your portfolio according to your investment goal and the level of risk you are willing to take. Within this framework, you make choices about the contents of the portfolio. Depending on market movements, you assess whether you want to adjust the weighting of investment products with higher and lower risk. The likelihood of significant price fluctuations is higher with high-risk investment products. This way, you ensure that your portfolio fits both your profile and the market situation even in turbulent times.

Judith Sanders explains: “If you are not invested, you miss the worst days but also the best days. And it's precisely those days that are important for a positive return. Being invested on the good trading days is crucial. The total annual result depends on this, and not being invested during these days has a strong negative effect on your total return. Furthermore, no one can predict when the best and worst stock market days will occur in a year.”

Scientific research shows that investors find it extra difficult to stick to the original investment plan if the markets fall for days on end. Judith: “This makes it extra important to work systematically and look at investments with distance and without emotion.”

Also consider: the longer you invest, the more you benefit from the advantage of compounding returns. This can contribute to wealth growth in the long term. A longer investment horizon offers more room to absorb temporary declines in value, but it does not guarantee a positive return.

A falling market naturally also offers opportunities. Some investors consider buying more during a dip. But experience shows that timing is tricky: you only know afterward whether you entered at a good time. You can also regularly invest a fixed amount to spread your risk over time. The strategy of investing a fixed amount at regular intervals is called dollar cost averaging, and the method for this is periodic investing. This averages the purchase price and increases your chance of potential returns. You can easily set up periodic investing via the ABN AMRO app or Internet Banking.

Hopefully, this article gives you some more insight. It’s quite understandable if you lose sleep over a stock market fall and perhaps even consider quitting. But ideally, you are investing with money you can spare. Try to look at your investments without emotions and ask yourself: what am I doing it for? Can I still achieve my long-term goal? If so, you don't need to change anything. Otherwise, consider where you can adjust the weighting within your portfolio, the risk of your investment products, and the spread of risk over time.