How to deal with stock market falls

With share prices looking wobbly, here’s how to think about your investments during a time of crisis

When you invest your money, there’s always risk involved. Your investments could rise and fall in value and the reasons for it could be out of your control. 

It can be worrying but don’t let it put you off investing. Here’s how to deal with wobbles in the stock market and let your investments recover.

What can cause stock markets to fall?

Many things can cause stock markets to take fright, and your investments to fall. Sometimes it’s a global disaster or the outbreak of war, such as Russia’s invasion of Ukraine in 2022. 

But a crash can also happen when investors suddenly lose confidence after reports of weak economic data, or, as we have seen in 2025, political events such as Trump’s trade wars. There may be a combination of different factors too, which can make it difficult to pinpoint the exact reasons why your investments have fallen in value.

Whatever the reason, as a beginner investor, a drop of 10% or 20%  in the value of your investments may feel very scary. But here are five things to think about in a time of crisis that can help you weather the storm. 

Remember, you haven’t actually lost anything yet

If your investments have fallen in value don’t panic and rush  to sell them. At the moment it’s only a ‘paper loss’ but if you take action and press sell it will turn into a real loss. 

Think carefully about your reasons for selling. If you sold your investments today, when would you want to buy them again? When they’ve fallen further? Wouldn’t you feel just as nervous then?  Even professional fund managers get market timing wrong, so don’t try to be one in your spare time, especially if you don’t have much time to spare.

Ask yourself is this an investment that would still look like a good opportunity today? Does it still have the potential to grow or produce an income from here? You must have had reasons for buying it at one point – has anything changed? If you had a spare £1,000 would you still put it into this investment? Savvy investors often top up on good quality investments when markets fall, treating it as an opportunity to buy at bargain prices rather than a threat. They follow investment guru Warren Buffett’s mantra ‘be greedy when others are fearful’.

Ignore your emotions

It’s very hard to act against the emotions that you’re feeling when markets fall because we’re hard-wired to think like a stone-age hunter gatherer. We have strong emotions and instincts that enable us to run away from the sabre-toothed tiger and hoard food when times are tough. 

But running away in fear or acting over cautiously can be a bad idea in relation to the stock markets. That’s because the pain of a loss feels more significant than the pleasure of an equivalent gain, which can lead to you selling up too soon. To be a successful investor, you must buy low and sell high. Unfortunately, most people allow their emotions to get the better of them and instead, they buy high and sell low.   So make sure you’re acting rationally and for the right reasons before you sell up or buy more investments. Make sure you slow down your thinking and calmly assess the facts. Some investors like to employ a Financial Advisor to help sound the alarm on any decisions that appear to be irrational. But you could also talk your investments through with a friend or family member – the key is not to reach a snap decision.

Likewise, it’s hard to ignore the market noise – the newspapers and social media will be full of the news of the market crash. But also be wary of what your friends, cab drivers or someone in the pub says about investing because all this noise can influence your emotions. If everyone around you is feeling scared, it’s hard not to feel the same. 

That’s why many people drip feed their money into investments. Putting a regular monthly amount into the stock market on the same day every month or spreading a lump sum investment out over a period of months are both good options. 

Drip-feeding makes you buy in when you’re feeling like you may not want to. It’s a good discipline that can be beneficial in the long run as your regular investment will buy more value when stock markets fall. 

Time is on your side

Learning to invest means accepting that there will be volatility – ups and downs – in the markets. If you haven’t already, it’s time to swot up on some stock market history. If you look at a very long graph of stock market performance, you’ll see that what seemed like huge crashes at the time were only tiny dips in the curve upwards. 

Time and again, markets have recovered and rewarded investors who had the patience and discipline to stay invested. So the best investors keep focussed on the long term.

Do you still have five years before you need the money? If so, hold on for the ride – there’s time for the stock markets to recover. And if you have 10 years to go before you need the money, please relax. There have only been a handful of occasions in the stock market when markets haven’t recovered over the long term. 

Losing money over the long run can never be ruled out entirely and would clearly be very painful if it happened to you. However, it is also a very rare occurrence.

Reconsider your risk levels

If a big fall in the markets keeps you awake at night or makes you feel stressed out, maybe it’s time to check that you have the right level of risk. Many people start investing by buying a global tracker fund. This spreads your risk a lot but it will be fully exposed to shares through the global stock markets. You can reduce your risk away from shares, which are most risky, by adding bonds, gold and cash, for example. 

The mix of different investment types is called diversification. It’s essentially not keeping all your eggs in one basket. The idea is that if you have a mix of investments – different types, industries, geographical locations, for example – falls and rises in different areas will balance you out. You should be diversified within your shares too – between large and smaller companies and between different sectors and regions. 

The percentages in which you spread all your different investments is called asset allocation. 

A common rule of thumb for asset allocation is to subtract your age from 100 to determine your allocation to shares vs bonds. For example, using this rule, if you are 30, then you’d allocate 70% to stocks and 30% to bonds (100 – 30 = 70). If you are 60, you’d allocate 40% to stocks and 60% to bonds (100 – 60 = 40). But if you have a higher appetite for risk than most people your age, then you might want a bit more in share, or if you’re more cautious than then average person, you might want a bit more in bonds. 

Plenty of academic studies over the years have shown that asset allocation accounts for most of investment performance, with timing the market – buying and selling at the right point – only adding a little extra on top. That’s because most of a typical fund’s growth (or losses) comes from general movements in the stock markets. This means it’s more important to be invested in shares than to worry about when to buy and shares or whether you’ve picked the right fund manager. It’s summed up in the neat investment mantra: “Time in the market is more important than timing the market.”

A stock market fall can affect your asset allocation – the mix of different types of investments that you hold. If you have a global tracker fund then you only have shares so a stock market fall would be more extreme. That might make you want to add a bond fund. 

The important thing is to focus on getting asset allocation right for the future. Have you got too much exposure to shares from one country or region? Have you got the right mix between shares, bonds, gold and other assets? 

Do what’s in your control

While stock markets are beyond our control, which can make us feel helpless, the one thing that we can control when investing is the fees that we pay. Can you cut some costs on your platform fees, pension charges or fund fees? Even a small difference in fees can make a big difference to your outcome over a long period of investing. 

According to calculations by AJ Bell, a 0.5% reduction in charges can increase your investments by more than £26,000 over 20 years on a £100,000 portfolio. Even a 0.2%  reduction would give the same portfolio a £10,000 boost over that period. 

Taking the time to research the fees that you pay and perhaps transfer to cheaper firms can really be worth the effort.