Should you cash out if the stock market fall is affecting you? Here are some tips by expert economists

The market’s sliding. Your balance is shrinking. So now what?

You check your retirement account. It’s down... again. The drop in stock prices after Donald Trump’s tariff tactics has wiped out weeks, maybe months of growth. If you’re thinking about selling everything and sitting in cash until the dust settles, you’re not alone.

But according to economists watching this play out, reacting emotionally to short-term market swings can do more harm than good. The losses on paper feel bad, yes, but turning them into real losses by cashing out? That can be worse. Here’s some of the advice doing the rounds...

Why cashing out can backfire

Markets fall. Then they recover. Not always on your timeline, but historically, they always do. If you sell now, you risk missing that recovery—and buying back in later at higher prices, having lost not just money, but time in the market.

And even if you’re sitting in cash, it’s not a risk-free place. With inflation expected to rise under the new tariffs, your cash will likely lose value over time, especially after taxes take a bite out of any interest you earn.

What should I do instead?

For most people, the answer isn’t “do nothing” – but it’s also not “do something drastic.” It’s about thinking clearly about when you’ll need your money.

If retirement is still decades away, these drops are just noise. Even if you’re in your 50s or 60s, most of your savings will remain invested well into your retirement years. In that case, holding a mix of stocks and bonds can help absorb some of the shock—and history shows that diversified portfolios eventually recover.

Even the traditional 60/40 mix (60% stocks, 40% bonds), while far from perfect, has delivered steady returns over the long term. It doesn’t dodge every bad year, but it has outpaced inflation consistently over multi-decade periods.

Timing matters more than timing the market

The real question isn’t what’s happening right now, it’s when do you need this money? Anything you’ll want to spend in the next five years should already be somewhere safer: high-yield savings, short-term bonds, or CDs. That gives the rest of your portfolio time to rebound.

Retirees, or those close to retirement, may want to raise a cash buffer to cover one to two years of expenses, so they don’t have to sell stocks when they’re down. But if you’re younger or still earning, this may be the moment to increase contributions, not cut and run.

Is this a buying opportunity?

Yes, falling markets can offer better prices for long-term investors. But that doesn’t mean you should pour all your spare cash into the market right now. If you want to buy the dip, do it gradually. Add a bit at a time. Let dollar-cost averaging do the work.

Target-date funds in your 401(k) already manage this risk over time. If you’re not sure what to buy, those can be a good default. Just don’t confuse bargain hunting with gambling.

The bottom line: don’t sell in a panic

This isn’t the first market drop caused by political chaos, and it won’t be the last. If your investments are matched to your goals and timeframes, there’s rarely a good reason to rip it all up when the headlines get scary.

What matters is that you’re not forced to sell low just because you didn’t prepare for volatility. That’s the real damage. Markets fall. Portfolios wobble. But bad decisions do the most lasting harm.

(Note that this article is for general information only and does not constitute financial advice. Always consult a licensed financial advisor before making investment decisions)

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