Key insights
- The author discusses preparing for a potential market crash by creating a stock watchlist with target prices. They emphasize the importance of not selling during a crash and suggest considering S&P 500 index funds. The article acknowledges potential market headwinds like inflation and international conflicts but highlights the market's recent history of rapid recoveries.
The S&P 500 (^GSPC +1.18%) is up in positive territory, but earlier in the year, it was looking like it might be heading for a significant decline. Things can and have changed suddenly in 2026, and there's still the possibility that the market may go on a prolonged tailspin, even crash. Between inflation, international conflicts, and worsening economic conditions, there is no shortage of potential issues that could weigh on the markets this year.
But the key thing I've noticed, ever since the pandemic, is how quickly things can change. In 2020, the market fell suddenly but also recovered, and seemingly no one was ready for such a quick turnaround. In 2022, it crashed again, and a recovery took longer, but once artificial intelligence (AI) became a hot investing theme, stocks again proceeded to take off. Last year was another great example, with the announcement of reciprocal tariffs briefly crippling stocks only for many of them to swiftly rebound.
I did invest in some stocks during last year's brief decline, and that's what I'd plan to do if there were a crash this year. The key thing is to be prepared.
I think the most important thing is to have a watch list of stocks that you'd feel comfortable buying. Then, for each one, also assign a price, indicating at what level you think it would be a good buy. I have this set up in a spreadsheet, so it's easy to pull in current prices and see how far each stock on my watch list is from its price target.
There are times when the market may overreact to a piece of news and a stock tumbles even though it probably shouldn't -- that creates a potential buying opportunity. Having a watch list ready to refer to can put you in an excellent position to buy a quality stock at an attractive price.
Pulling money out of the stock market if the S&P 500 crashes can be a costly mistake to make. Even if you're unsure of what to invest in, you may want to consider holding S&P 500 index funds that track the overall market. The danger of simply exiting the market is that if the correction or crash proves to be another short-lived one, as it has in recent years, then you could miss out on strong gains.
Buying more stocks when the market is down can be a tough thing to do; no one likes to see red in their portfolio. But if you have many investing years left, it's important to consider the long term when buying stocks, not just what is happening to the market at this very moment.