How to Avoid Costly Mistakes When the Market Is Down

There’s no getting around it: 2025 has been a hectic year for investors. The market has whipsawed back and forth thanks to uncertainty surrounding tariffs and trade wars, stubbornly high interest rates, and inflation that continues to cause headaches for spenders and savers alike.

All the ups and downs—and worries about what might be coming—are making some investors nervous. Maybe you’re one of them.

Listen, stock market highs and lows are tough for anyone who’s about the business of building wealth for the future. In the middle of a market dip, it’s easy to get caught up in waves of emotion. Fear and worry can lead to panic—which could cause you to make serious and costly mistakes. 

But if you want to be a successful investor, it’s important to control your emotions. If you aren’t careful and thoughtful, you could miss out on thousands of dollars of growth.

Should You Keep Investing When the Stock Market Is Down?

The short answer is yes. As long as you’re out of debt and have a fully funded emergency fund in place (3–6 months of expenses) and a steady income, you should stay the course and continue investing for retirement. Are we saying not to worry about stuff you can’t control? Yes. That’s exactly what we’re saying. You can’t control the stock market, government policy, or the fact that some people feel it’s okay to throw themed, catered parties for their pets.

What you can control is your investing mindset and your savings rate—so focus on that. Success with your investments requires standing firm on at least a couple of truths:

• First, it’s normal for the stock market to go up and down (and it’s been doing that a lot lately!).
• Second, you’re more likely to win if you keep your money in. Why? Because over the past 40 years, the S&P 500 index has given returns at about 11% on average.²

That’s not to say investors don’t face challenges. According to Ramsey Solutions’ State of Personal Finance study, a third of Americans are going to have to work past the age of 65. Part of the problem is the amount of debt the average American carries, but a huge reason many people aren’t going to be able to retire is because they aren’t investing enough to do it.

This is why we recommend investing 15% of your gross income in good growth stock mutual funds with tax-advantaged retirement accounts like your 401(k) and Roth IRA. This approach to investing flat-out works. It has helped thousands build wealth and become Baby Steps Millionaires.

 

How to Avoid Costly Mistakes When the Market Is Down

As long as you leave money in your retirement accounts, you haven’t “lost” anything. You’ll only lock in your losses if you panic and take all your money out. That could cost you hundreds of thousands of dollars in the long run. Maybe more.

Market chaos, inflation, your future—work with a pro to navigate this stuff.

So, whether you’re wondering, Should I keep investing when the market is down? or Why is the market down in the first place?, there are three things you can do to avoid big mistakes. Let’s dig into these one by one.

1. Don’t bail on your investments.

When your retirement balance starts dropping, your knee-jerk reaction might be to protect the money you have left by getting rid of “risky” mutual fund investments and moving your money to something “safe” until the market stabilizes.

But it’s impossible to predict in detail what’s going to happen on Wall Street (no one can “time” the market). Constantly jumping in and out of it will generally cost you more money than if you’d left your investments alone and been patient.

According to Fidelity Investments, if an investor starting with $10,000 missed the best five investment days between January 1, 1980, and December 31, 2022, they would’ve missed out on roughly $411,000 in growth. That number more than doubled to over $908,000 if they missed out on the best 30 days.³

Remember, investing for retirement is a marathon, not a sprint. It takes the average millionaire about 20 years from the beginning of their financial journey to reach a million-dollar net worth. That means it takes years of financial discipline and investing consistency—no matter what’s happening with the stock market—to build sustainable wealth. The only successful way to approach it is as a long-term process, and processes tend to come prepackaged with ups and downs.

So, don’t focus on day-to-day or month-to-month losses. Take a step back and look at the big picture. Hang on to your mutual funds, even through rough markets. When they rebound, you’ll be glad you didn’t bail.

2. Keep investing—especially when the market is down.

Thanks to inflation and other economic worries, more than half of millennials (53%) owe more than they have saved for retirement. The situation for baby boomers isn’t much better (46%—and with less than $100,000 in their retirement savings)! That’s not a recipe for dignity in your golden years, and it reveals that too many people are living for today at the expense of tomorrow. The only way to win with investing is to cultivate a long-term perspective and keep on doing it—even if the market seems crazy right now.

Think of it this way: When the market drops, your mutual fund shares are on sale—you’re getting them for a lower price. In a down market, it’s often time to buy—not sell. If you need a new couch, saw one priced at $700 last month, and now see it on sale for $400 . . . that’s a pretty good deal! And getting a pretty good deal on something as important as your investments is a big deal.

Historically, the stock market has always recovered its losses. Sometimes in a day. Sometimes in a week. Sometimes in months or years. But it always has. And when the market does go back up, so will the value of your mutual funds.

3. Talk with an investment pro before making big decisions.

We’re all human. That means we all let emotions get the best of us from time to time. It happens. But when you start making decisions based on feelings instead of facts, trouble’s at the door.

The best way to keep things in perspective—and keep your investments on track—is to work with an investment professional. Having a pro in your corner can help you keep a cool head and stay focused on your long-term goals.

Why You Should Stay Invested Even If the Market Is Down

Most of us remember (but would love to forget) the Great Recession. There was a lot of talk about ruined retirements and people whose 401(k)s had basically “zeroed out” back then (hysteria’s fun, isn’t it?). If those tough years taught us anything, it’s how important it is to keep a level head and a long-term perspective when the market turns south.

So, let’s hop into a time machine and turn the clock back to October 2007—about one year before the global economy crashed. Flo Rida is celebrating the release of his new single “Low,” which goes on to become Billboard’s song of the year. The Red Sox win another World Series. And Bee Movie is about to hit theaters nationwide (it was a slow month at the box office).

But most importantly, while all this is going on, the S&P 500 index—which is used to measure the health of the economy as a whole—hits an all-time high of 1,565.15.⁴ Times are good! That’s especially true for our friendly example guy (we’ll call him John), who in the same month has $400,000 invested in his 401(k).

But about a year after this, in the fall of 2008, there’s a crash. The housing market collapses. Lehman Brothers goes bankrupt. The Great Recession moves in, puts its feet up, and throws a womp-womp party. In the aftermath, from late 2007 through early 2009, it’s terrifyingly clear what happened: nearly $8 trillion of value has been wiped out.⁵

The stock market bottoms out on March 9, 2009—when the S&P 500 closes at 676.53.⁶ For those doing the math, that means the stock market lost more than half of its value in the 17-month period between October 2007 and March 2009. Our friendly example guy John takes a peek at his 401(k), and his heart sinks—his account balance has dwindled from $400,000 to $169,320.  

But while folks all around him are panicking and pulling money out of their 401(k)s and IRAs to put into “safer” investments, John takes a deep breath and calms himself. He knows that investing in the stock market is like riding a roller coaster—the only people who get hurt are the ones who jump off before the ride’s over.  

Slowly but surely, over the course of several years, the stock market recovers. And in March 2013, exactly four years after hitting bottom, the stock market fully recovers everything it lost, passing the all-time high set way back in October of 2007 . . . and it keeps going up!⁷

Fast-forward to spring 2025, and the S&P 500 stands at (drum roll, please . . . ) 5,600 and change!⁸ Since John didn’t panic but left his money alone, he now has $2.1 million in his retirement account. That’s right—he grew that investment to more than five times what he had at the pre-recession peak. And he didn’t have to invest another penny to get there! He just had to be patient.⁹

Connect With an Investment Pro

So, what will your retirement look like? You can get started on your own investing journey with a professional in your corner. Don’t have an investment pro? The SmartVestor program can help you find pros in your area who can educate and empower you to make smart decisions about your investments.

Find your SmartVestor Pro today!

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.