The Motley Fool

Market Crash: 3 Things You Must Do

Image source: Getty Images

Investors are still deep inside today’s market crash, with COVID-19 and the oil and gas glut plunging stocks to prices not seen in a decade. It can be hard to know where to turn or what to do, and it can lead investors to make some big mistakes.

Instead of letting this market crash make your decisions at a time like this, it’s best to remember a few key basics of investing.

Gut check

We’re human. It’s only natural to look at today’s market crash and feel our stomach do backflips. You talk to your friends and they’ve all sold as many stocks as they can, fearing the stock market could sink even lower. But that would be a huge, huge mistake.

At a time like this you have to keep your emotions in check. Investing isn’t a science exactly, but it most certainly shouldn’t be based on your emotions. I get it; it’s stressful seeing your stocks go further and further down.

But if you look back at the stock market during the last recession a decade ago, you’ll see that stocks rebounded within a year. Canadian banks, for example, fared as some of the best in the world, trading at pre-crash prices within a years time.

Move things around

If you’re really concerned that your stocks are moving around too much in the opposite direction, it might be time to juggle around your stocks. Perhaps you were part of the cannabis boom, buying up stocks hoping to make some quick cash.

Unfortunately, most cannabis stocks aren’t likely to bounce back for a while, so it might be best to sell some riskier stocks and either keep the cash or reinvest in something more stable.

Again, Canadian banks are a great bet to be one of the first to bounce back. A stock like Royal Bank of Canada (TSX:RY)(NYSE:RY) is Canada’s largest bank based on market capitalization, and has expanded around the world to gain a foothold in a number of countries and continents.

This includes Latin America, an emerging market that could see serious cash come in as the economies strengthen. Its wealth and commercial management sectors are also highly lucrative, meaning that investors should expect cash to keep coming in for years to come.

Don’t bottom out

There can be a few signs that a market bottom is coming, but during a market crash it’s probably much better just to do the above. Check your emotions, rebalance your portfolio, and look to stocks that offer a solid long-term investment. A stock like Royal Bank is the perfect option to bring in cash for the long term, as it has decades of growth behind it.

This also includes its dividends, meaning you’ll be bringing cash in even during today’s market crash. Royal Bank offers a strong dividend yield of 5.98% as of writing, meaning an investment of $5,000 today would bring in about $275 per year. That money could be used to stash away for the future or to reinvest in other great stocks.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe owns shares of ROYAL BANK OF CANADA.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.