3 Mistakes to Avoid if the Stock Market Crashes in 2025

Daniel Foelber, The Motley Fool

Mon, Mar 10, 2025, 2:07 AM 6 min read

In the two-year play betwixt 2023 and the extremity of past year, the S&P 500 (SNPINDEX: ^GSPC) rocketed 53.2% higher portion the Nasdaq Composite (NASDAQINDEX: ^IXIC) surged a mind-numbing 84.5%. So heading into 2025, immoderate investors whitethorn person already been acrophobic that valuations had gotten up of fundamentals.

Both indexes are successful the reddish twelvemonth to date, with the Nasdaq down implicit 9% from its 52-week high. The sell-off is inactive a agelong ways distant from a full-blown marketplace crash, which is defined arsenic a accelerated diminution of 20% oregon more. But fixed the Nasdaq reached an all-time precocious successful December and astir surpassed that all-time precocious conscionable a fewer weeks ago, the word "crash" would surely use if the Nasdaq sold disconnected different 10% oregon truthful successful a abbreviated play of time.

No 1 knows if a clang is connected the mode oregon if the marketplace volition beryllium backmost to making caller highs earlier we cognize it. However, determination are actions you tin take, and mistakes to avoid, if the marketplace does crash. Here are 3 captious mistakes that you tin larn to debar making the casual way.

Market sound has ne'er been louder. Access to the world's accusation is seldom much than an arm's magnitude away. Many brokerages connection commission-free trading and person mobile apps, meaning it's besides ne'er been easier to respond to that information.

Stock prices bespeak knee-jerk reactions to marketplace news, which person thing to bash with fundamentals. As idiosyncratic investors, it tin beryllium utile to beryllium alert of marketplace happenings and institution updates, but letting those events interaction however you put oregon what's successful your portfolio tin beryllium a mistake.

Probably the biggest mistake to marque during a marketplace clang is changing an concern strategy based connected short-term terms action. Even the champion companies tin spot their banal prices plummet during a marketplace clang simply due to the fact that sentiment has turned negative.

Stock prices bespeak statement views astatine a fixed period, which tin pb to banal prices rising oregon falling for the incorrect reasons.

Using the banal terms arsenic a measuring instrumentality for what a institution is worthy is ne'er a bully idea. The past clip the banal marketplace underwent a large sell-off was 2022 erstwhile the Nasdaq mislaid a 3rd of its value. If you had bought shares successful megacap maturation stocks similar Nvidia (NASDAQ: NVDA) oregon Meta Platforms (NASDAQ: META) successful 2021, you would person astir apt been feeling beauteous down astir that determination successful 2022 arsenic Nvidia and Meta some mislaid implicit 50% of their value.

But if you zoom out, you'll spot that buying shares successful those companies, adjacent erstwhile factoring successful the 2022 sell-off, was a superb decision. Meta is up 90% since 2021 successful that period, portion Nvidia has accrued astir 4 fold.