Few things in life are guaranteed: death, taxes (in most places), experiencing all four seasons (again, in most places), and the stock market crashing every few years. We are currently in one of those cycles—this time, driven by the Trump tariffs. The market is experiencing wild swings, mostly trending downward, occasionally interrupted by brief upswings—often depending on Trump’s mood of the day, or even the hour.
The Opportunity in a Crisis: How Seasoned Investors See It
For a seasoned investor, while the current market conditions are still concerning, they also present a great opportunity. Experienced investors often view this period not as the market tanking, but as a fire sale. If you look at various Twitter and Reddit communities, many are already taking advantage—snapping up stocks that, in some cases, have dropped by as much as 20%.
The Car Analogy: How to Think About Market Discounts
Think about it this way: imagine you’ve been eyeing a car for months, but you’ve held off buying because of the price. Then one day, the dealership calls to let you know that the exact car you’ve been waiting for just dropped 20% overnight. You’d probably be thrilled and rush over to make the purchase.
While we can’t directly compare buying a car to investing in stocks, the common thread is the steep discount. When the price is slashed significantly, it triggers a sense of urgency—even FOMO (Fear of Missing Out). This brings me back to the main topic on hand: being ready for such market downturns – or even crashes. First off, let us define the major difference between a market downturn or a market crash. The former is usually characterized by a drop of 5-10% in the market, while with the latter, the decline could be as steep as 20% or more; 1987 Black Monday being a major crash.
Recent Market Volatility: Is It a Crash or a Correction?
Over the past week, the stock market has seen extreme volatility, with a sharp crash-like drop—triggered by President Trump’s announcement of sweeping tariffs—causing major indices to fall over 10% in just two days. However, a swift policy reversal, including a 90-day pause on most tariffs, sparked one of the strongest rallies since World War II, with the S&P 500 and Nasdaq posting significant single-day gains. This dramatic sequence suggests the market’s recent behavior doesn’t fit cleanly into a typical crash or downturn, but rather reflects a period of intense, geopolitically driven swings.
Are You Prepared for Market Volatility?
The crucial question for those who are into investing—and even day trading—is whether they were ready for this market downturn? Sure, not many may have seen it coming, but that is not the point. As mentioned earlier, the market goes down every few years, almost guaranteed, and while few know when or what the cause will be—who could have predicted the Covid-19 pandemic and ensuing crash—it is inevitable. And it is bound to happen, so why not be ready?
How do you get ready for this, you may ask? By having money on the side and being ready to use it to buy stocks that have lost significant value. This is not to suggest that you should time the market or wait for a crash, but rather be invested in the market and buy regularly, while setting some money aside for those days, weeks, or periods when the market is in deep red, almost in crash territory.
Establish Your Criteria for Buying the Dip
How much money you set aside is entirely up to you and your financial situation—there’s no one-size-fits-all answer. What’s more important is deciding when to dip into that reserve. Will it be when the market falls by 10% or more? Or maybe you’re comfortable entering at a 5% drop? The key is to establish clear criteria that make your move worthwhile.
For example, if you’ve kept $10,000 on the sidelines for months or even years, it may not be strategic to invest it after only a 5% dip—that might not justify the wait. Instead, you might set a minimum threshold, like a 10% market decline, to make the most of your reserve. At that point, you’re effectively getting $1,000 in extra value from your $10K reserve just because of the drop—a smart move if you’re playing the long game.
How to Benefit from Volatility: Stay Calm, Stay Prepared
Weeks like the one we just saw in the market can either break your portfolio or set you up for long-term gains—all depending on your mindset and strategy. Do you view the volatility and panic sell? Or do you stay calm, follow your plan, and tap into your reserve funds to take advantage of market downturns—or even full-blown crashes—like the one we’ve just experienced?
While we’re certainly not out of the woods when it comes to market mood swings, now is the time to prepare for the next wave of volatility. Keep some cash on the sidelines, ready to deploy when prices dip. That’s how you turn uncertainty into opportunity—by buying more when prices are low and staying the course while others are shaken.