Five years ago, the stock market was crashing, and who can honestly say they werent panicked?
The 2020 market meltdown began March 9.
The bloodbath continued for an agonizing two weeks.
Some economists predicted the stock market would take three years to recover.
Instead, stocks took 181 days to return to their pre-pandemic highs.
The stock market doesnt reflect the economy.
The stock market fully recovered to pre-pandemic levels by August 2020.
Yet unemployment remained stubbornly high.
COVID-19 shutdowns were hammering small businesses.
The big lesson: The stock marketdoesnt reflect the economy.
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What the stock market tells us is whether investors are optimistic or pessimistic.
In the year after the 2020 crash, they were mostly optimistic.
They believed the financial effects of COVID-19 would be relatively short-lived.
Some stocks soared precisely because of the pandemic.
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You only lose money in a crash when you sell.
It may seem obvious in retrospect.
But if youd stayed calm and kept your money invested, youd have $11,820 a year later.
Youll miss the best days if you have a go at avoid the worst ones.
If you sell after a market crash, you risk missing the best days.
But had you missed the 10 best days, youd have less than half that $16,180.
A stock market crash can be a huge opportunity.
The problem, of course, is that you dont have a crystal ball.
But that doesnt matter if youre investing for the long term.
FOMO is a real fear.
Plenty of people werent scared off by the stock market crash.
Instead, the crash exposed a different kind of fear: FOMO, or fear of missing out.
While investing after a crash is often a great opportunity,some investments are too risky.
We just dont know when.
The stock market has recovered from every single crash in history.
The trouble is that we never know when that recovery will happen.
The COVID-19 recovery that happened in 181 days was the fastest on record.
It wasnt until March 28, 2013, that stocks would fully recover.
An emergency fund is the best investment you might have.
The biggest lesson of the 2020 stock market crash andrecessionis just how vital an emergency fund is.
Youremergency fundmay not earn you the bragging rights you get from picking a winning stock.
Peace of mind and security matter more than bragging rights.
Focus on your emergency fund regardless of whats happening in the stock market.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
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