The market crashed and you lost a lot of money. Here's what to do next

Your investments have taken a plunge, but you don't need to worry as much as you think you do.

Dori Zinn Contributing Writer

Dori Zinn loves helping people learn and understand money. She's been covering personal finance for a decade and her writing has appeared in Wirecutter, Credit Karma, Huffington Post and more.

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Dori Zinn

July 17, 2020 6:20 p.m. PT

3 min read

The coronavirus crisis has left millions unemployed, sick and under financial strain. The last thing many of us want to do right now is look at our investments.

If you haven't yet, try not to. Through March, the S&P 500 had the worst quarter since 2008 while the Dow Jones hadn't seen a drop this bad since 1987. And in May, Federal Reserve Chair Jerome Powell warned of a "prolonged recession," leaving many wondering if the worst is yet to come.

Chances are you've already looked at your portfolio and you're anxious about the cash you've lost. That feeling is normal and you're not alone. But if you're wondering what to do with such a tumultuous market, there's an easy answer: nothing.

Before you make drastic moves with your investments, see which ones are best for your finances right now.

Read more: The best robo-advisors in 2020

1. Assess the damage

You're probably panicking. Watching your investments wash away in a matter of hours, days or weeks isn't exactly a fun time. But instead of freaking out, use this time to see which investments are worth keeping and which ones to drop.

Use this time to evaluate long-term goals. Are you OK with losing more money -- even in the short term? There's a chance your earnings will continue to drop and if you need your money within the next few months to a year, you might need to move it to a more stable account, like a high-yield savings account.

It might be time to cut your losses for some securities and use that money elsewhere. If you need the cash, use it. Otherwise reinvest in the market, whether in stocks you can buy cheap or dividend-paying stocks, where you'll get a cash-out every month or quarter.

2. Evaluate your portfolio

The stock market continues to rapidly rise and drop every few days. And if you judged the US economy based on the stock market alone, it looks like we're in a strong recovery (we're not).

If you have extra cash on hand, invest in the stocks that were once too expensive for you. The strongest companies will most likely be here when the crisis is behind us. Look at the costs and see which ones you want to add to your investments.

You may also want to check in on companies and sectors you haven't invested in. For instance, health care and industrials might be something to explore.

3. Dial back stock-only investments

While your portfolio should already be diversified, now might be the time to consider a conservative move. If you're closer to retirement, look at more conservative investments. Some securities invest in stocks, bonds, CDs, real estate and other types. Consider diversifying in:

Exchange-traded funds

Index funds

Mutual funds

Annuities

Lower-risk investments are a safer bet, even if they are still risky.

4. Stick it out

It's easy to balk when you see investments plummet. But the younger you are, the more likely you are to enjoy a stock market rebound. The 2008 recession lasted a year and a half but most recessions last less than a year. (The other exception is the Great Depression, which lasted nine years.)

Because most recessions are short-lived, take a moment to remember that the stock market plunge is short-lived, too. Once you're on the other side of this, you'll see your investments thriving -- maybe even better than they were before.

5. Liquidate if you have to

While younger folks might have the luxury of riding it out, not everyone can afford it. For one thing, you might be closer to retirement. This means you can't afford to take bigger risks -- including waiting for a rebound that you aren't sure will come before you stop working.

If you've lost your job or you're facing significantly reduced hours (and a lower paycheck), you might not feel comfortable keeping your money in the stock market any longer than you need to. Taking your money out isn't a bad thing if it's a need. It's better to cover your costs instead of going into debt just so your investments can earn a little more later on. If you need it now, use it now.