You Invest and the Market Falls: How to Survive It

The stock market is cyclical, ups and downs of quotes of individual securities and indices always alternate with falls. So, if you decide to become an investor, sooner or later you will definitely see how the value of assets in your portfolio will begin to decline. Strong nerves and knowledge of the laws of the stock market will help not to panic on the first day.

A temporary decline in asset prices is called a correction. In this case, we are usually talking about price reductions of more than 10%, but less than 20%. For falls over 20%, more dramatic definitions are used: a collapse, a crisis, or a storm. Although these figures are somewhat arbitrary. There is no clear percentage criterion, after which the correction necessarily turns into a storm. The main difference between a crisis and a technical correction is that the fall occurs unexpectedly for everyone.

A good example is the global market crash in February-March 2020, at the very beginning of the covid-19 pandemic . Then, in a few weeks, one of the world's most popular stock indexes, the S&P 500, collapsed by 34%. The Russian RTS index fell by 49% from its peak in January to its minimum in March 2020. Did all investors immediately go bankrupt? No.