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What to do with your 401k when the stock market drops...

Have no fear, fellow 401k owners! Blooom was founded by financial advisors who've been through a market swing or two. Both experience and history has taught us that the wisest thing to do in a market downturn is to avoid panic.

The best advice on what to do when the market drops:

Market Truths

You only lose money if you sell.

That's right — when the market goes down (as it will) you aren't really impacted unless you sell what you have. It's just paper losses. You still have the same holdings of stocks and bonds.

In order for you to sell, someone else must buy.

And who are these people buying when you're selling? Likely savvy investors understanding the long-term investment and recognizing the "sale" on stocks.

piggy bank overflowing with light bulb

Still considering selling?
Seven questions to ask yourself...

  1. Why are others buying when you are selling?

    Someone believes the stock you just gave up will be worth more in the future, otherwise, they wouldn't be buying. Right?

  2. Do you believe the market will be higher when you retire?

    Although ups and downs are inevitable, history tells us the market trends up over time. Hold on an enjoy the ride!

  3. What are you going to do with the money if you sell now?

    If you don't plan on touching your nest egg for decades, why do anything?

  4. Will you stop contributing?

    Remember, if you stop contributing, you'll lose out on the free money you receive through your company's match. You'll also miss out on all the potential future growth if/when the market comes back.

  5. Are you tempted to cash out?

    Careful! You'll potentially owe a bunch of taxes. Plus, possible penalties for early withdrawal. If you hate losing money, that last thing you should want to do is cash out because then you'll lose even more.

  6. How will you know when to start buying again?

    How do you know when the market is going up except after it's already gone up?

  7. Did you know that between 1993 and 2013, you'd earn 40% less if you missed just ten days invested in the stock market?

    What if you miss out on one (or more of those days) because you sold now?

Still have questions?

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