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Published: Nov 16, 2022 6 min read

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Photo illustration of a person relying on dwindling savings to hold up a stock market investment arrow
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Seeing red in your investment accounts is scary. But it doesn't mean you should stop contributing money. In fact, it's arguably extra important to ignore the urge to sell and keep contributing to your investments when the markets are struggling.

The S&P 500, a benchmark commonly used to measure how U.S. stocks are doing overall, is down around 17% for the year. The index fell into a bear market in June before enjoying a summer rally and then tumbling again in the fall. The past month has been a good for the stock market but still, experts say more volatility is likely as investors contend with the Federal Reserve's interest rate hikes, which tend to weigh on the price of financial assets like stocks, bonds and crypto.

All that is to say, your investment portfolio has likely seen better days than it has this year. But even when it looks like the balance in your 401(k), individual retirement account (IRA) or other investment accounts is getting smaller, continuing to contribute to those accounts will set you up for success over the long term.

"Whenever we have market downturns, it’s hard for investors to 'keep their eye on the prize,' but that’s exactly what they need to do," says Jordan Sowhangar, vice president and wealth advisor at wealth management firm Girard, a Univest Wealth Division. "Instead of panicking at the negative number they’re seeing on their statements, they need to remind themselves of the big picture."

Volatility, including market downturns, will be sprinkled into that big picture, she says. But so will periods of positivity.

Here's why you likely want keep making contributions to your investment accounts, even when it feels like your money is going out the window.

Why you should keep investing during market downturns

Bear the following in mind as you consider what investing moves to make when the markets are struggling:

You're not actually losing money

It might feel like you're losing money when the balance in your investment account is shrinking, but until you sell, you're not actually saying goodbye to those hard-earned dollars.

Keep in mind that being in the red is only an “on-paper'' loss on your statement or app, says Bryan Stiger, financial planner at investment-advice company Betterment.

"You actually haven’t realized that loss according to the IRS," he adds. "You only have an unrealized loss that you have the chance to make back if you stay invested."

It's a buying opportunity

Market downturns can be scary — but they also mean financial assets like stocks are on sale.

"If you are financially able, down markets provide an excellent opportunity to buy into your existing or new investments at generally lower levels," Sowhangar says.

You are essentially buying in at discount prices, allowing the future growth potential of those investments to be even higher than what it once was.

You can't time the market

Because you can't know when markets will recover, you risk missing out on a comeback if you stop contributing to your investment accounts.

And the stock market's best days tend to happen right around its worst days. For example, between January 1, 2002, and December 31, 2021, seven of the S&P 500's best days occurred within just two weeks of the index's 10 worst days, according to J.P. Morgan Asset Management's 2022 "Guide to Retirement" report.

Diversification is key

In addition to sticking with your long-term plan, having a diversified portfolio can help spread out your risk. Diversification refers to having a range of investments in your portfolio that include those of different asset classes, like stocks and bonds, and sectors, like technology and manufacturing.

You also want to make sure you're invested in companies of different sizes, including large companies you've likely heard of and smaller companies not on your radar. Investing in a mix of domestic and international stocks is good, too.

If your investments are diversified, when one area of your portfolio suffers, another may hold steady or even do well.

Being diversified should allow you to see less red in your investments versus extreme peaks and valleys, Stiger says.

When should you stop contributing to investments?

Investing decisions are personal and should be based on your financial situation, goals and risk tolerance.

If you're running into financial problems or cash flow issues, it might be time to stop or pause the contributions, Sowhangar says.

You essentially want to make sure you have a positive cash flow stream, as well an emergency fund in liquid, secure, bank accounts, with the leftover dollars potentially going towards your investments, she adds.

Financial advisors tend to recommend saving up an emergency fund that could cover at least three to six month of your expenses should you face something unexpected, like losing your job or a big health-related cost.

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