Don't Panic Sell

A message for the over 60% of American adults under 50 with a retirement account: Wait it out — don’t lose your hard earned savings to panic

The market is crashing, and the number in your retirement fund¹ is shrinking fast. You worked hard for your money and are reasonably wondering “should I cut my losses and sell before it’s all gone?!”

Panic selling at the bottom of the market is how many, many middle class people were financially ruined during the Great Recession. Some sold out of necessity, but many were just scared.

Here’s why selling now / withdrawing to cash is a lose/lose situation — and why the billionaires are hoping you’ll do it.

MARKETS USUALLY RECOVER

If they do recover, you get your money back — as long as you didn’t sell.

Your investments aren’t like a savings account, where when the bank says you have a $100 balance, you’ll always have $100. Your investment account balance tells you something different — how much the stock market would buy your stocks for, right now. That number will be different tomorrow. You haven’t actually lost anything, when the market crashes — you still own the same amount of stocks. If the market recovers, those stocks will be worth more again. And your goal, for retirement, is to sell your stocks in 20 years, for more than you originally paid for them. When you sell during a crash, you’re probably getting ripped off.

The market has historically taken a few years to fully recover after a major crash². If you’re under 50 and saving for retirement, you can probably wait this out. The loss isn’t real until you sell — if you just wait, the market will likely go back up, and so will your balance. But if you sell now, the loss is “locked in” and your funds will never recover.

Let’s take an example from the Great Recession:

It’s October 9, 2007 and you have $10,000 in a 401k invested in the S&P 500. The market begins to drop. By March 9, 2009, the bottom of the market, the S&P 500 has declined 57%, leaving you with just $4,322 in your account. Devastating. Just like today, you wonder whether you should cut your losses and sell before it’s all gone. Let’s look at the result of selling vs waiting it out:

Option 1: Sell. On March 9, 2009, you sell for $4,322, put it in a bank account, and never reinvest it in the market. On January 1, 2025, you still have $4,322.

Option 2: Hold. You don’t touch anything, and you also don’t make any more investments. The market begins recovering a few months later, and the value of your portfolio increases each year. On March 18, 2013, the S&P 500 returns to 2007 levels, and you have $10,000 again — as if the crash never happened. The market continues to improve, and on January 1, 2025, without putting anything more in, your stocks are worth $34,706.

For those who think they have a trading strategy like selling now and buying when conditions improve again: Don’t do it. We call this “timing the market”, and literally everyone agrees it’s a very bad idea. It’s effectively gambling on your performance in a sport you’ve never even watched — you will almost definitely make unforced errors and lose to the professionals. Even if you win, you will probably end up owing short term capital gains taxes, paying penalties to the IRS, and generally getting fucked over.

THE MEDIA COVERS STOCKS LIKE SPORTS

Every newspaper in the world right now³ is showing two things: A big red line going straight down, and a white man in a vest, looking stressed. Headlines are using words like “meltdown” and “historic crash”, news anchors have their serious face on, it’s a spectacle. Of course you’re panicking, everything is telling you that this is a crisis⁴.

But here’s the thing — the media coverage of the stock market isn’t for you, it’s for them. They, people who work in finance, have a problem — they were hoping to earn a big bonus this year, and now they might not. But if your goal is just to see your retirement savings grow over the next 10-40 years, you actually don’t need to care about this. What happens with the market this month (or year) probably doesn’t have much impact on whether you achieve that goal unless you sell. That’s not to say that a recession won’t impact you, it absolutely will. But your biggest problem isn’t a market crash — it’s getting laid off and/or struggling to pay higher prices caused by tariffs.

So, when you see Sad Trader Man, just remember that you and he have very different interests. He’s sad because he‘s not getting his 500k ”holiday” bonus, and his boss might yell. You, someone uninterested in gambling who just wants to make nice soups in retirement, just need the line to eventually go back up.

DON’T GIVE THE RICH A DISCOUNT

Guess who bought all the stocks that people panic sold in 2008? The rich. When the market declines, the wealthy literally say “the stocks are on sale”, knowing that if/when the market recovers, the value of thse stocks will increase. But the only reason the stocks are on sale is because you’re selling.

SELLING DOESN’T REALLY HELP

If you’re thinking “but this crash is different!”, you’re right. There’s absolutely no guarantee that the market will recover just because it has in the past, and the circumstances are really different this time. The crash may or may not be intentional, or maybe it’s just the whims of a petulant wannabe fascist who doesn’t understand basic economics. The Secretary of the Treasury perpetually looks like he’s about to cry, while claiming everything is fine.⁵ Theoretical losses do eventually become real, and Japan has taken 30+ years to recover from their crash in the 90s. Your $10,000 401k could totally drop to $2,000 and…just stay there, forever.

A bet on index funds (the typical 401k contents) is ultimately a bet that the US economy will be stable/grow over the coming decades. We can all agree that that feels like a very risky bet right now. But if the market never recovers, our economy (and world) will be so deeply different for a generation or more that your retirement savings will be a footnote. Here’s what it comes down to — you can’t predict, control, or time the market. But you can choose how to align your fortunes. If you stay in the market, what happens to the rich is what happens to you.

WE SHOULDN’T HAVE TO CARE ABOUT THIS

Everyone deserves to live well in old age, without financial stress. You shouldn’t need a degree in finance to protect your savings, and the path to retirement shouldn’t include mandatory participation in a global gambling game that you don’t understand the rules of.

It didn’t used to be like this. Until the 1980s, the US had a different retirement system called “defined benefits”, aka the pension. The 401k (aka “defined contribution”) became popular in the 1980s, partially because it transfered responsibility for managing retirement savings from employers to employees. Before the switch, so long as you worked hard, you were guaranteed a stable income in retirement. But since the switch⁶, it’s been more of a Do-It-Yourself system, which is great if you work in finance and know a lot about investing. Predictably, this switch has increased inequality, and been bad for basically everyone (working class people, Black people, people without a college degree, etc) except, you guessed it, corporations and the ultra-rich. Retire the 401k and build a system that serves working people.

FAQ

Okay but what do I do?

For your retirement accounts? Mostly nothing. If you have auto-deposit, leave it on — you’ll naturally benefit from Dollar Cost Averaging.

Try to cut your expenses, and save an emergency fund — recessions means layoffs, and prices in the US are about to spike from the tariffs.

People suffer during recessions, in their body and their soul. Think about how you can help the people around you. We have to be in this together — both the recession, and all the rest of it.

Are there any circumstances in which I should sell?

Yes — if you’re going to need your savings soon, and won’t be able to wait years for recovery. You might be in this category if:

• you’re currently retired, or unable to work
• you’re planning to retire in less than 10 years
• you don’t have an emergency fund
• you plan to use your invested savings for a major purchase soon — like a house, tuition, etc.

All of these situations are outside the scope of this document, and I strongly urge you to speak with a Certified Financial Planner.⁷

How long will recovery take?

Nobody knows. Different recessions produce differently shaped recoveries. And, let me be very clear — I am not saying “the market will definitely recover in 1/5/10 years, or even ever”.

What I am saying is that recovery is more likely than not, you need professional expertise to sell successfully, and, if we don’t recover, having sold during the crash probably won’t be much help — the dollar will devalue, inflation will soar, and we will live in a radically different economy with different logic and tactics.

I don’t have any retirement savings, why should I care?

You love someone who does. Your auntie, cousin, best friend, neighbor. Talk to them and send them this link.

I’m an anti-capitalist/socialist/hate the rich — why should I care about the stock market?

The stock market is a cursed institution, and it’s perfectly reasonable to not participate and/or seek its demise. But it is also where the majority of middle and working class Americans store their savings, because investing is the most accessible path to a secure retirement for most of us.

Solidarity with the working class means that we want everyone, including our parents and cousins and neighbors, to live stable, comfortable lives at the end of their lives. We can’t fully prevent the billionaires from taking that from us — and we shouldn’t have to invest in the stock market to have it! But we can at least help our loved ones hold on to what they’ve worked for — by advising them not to panic sell without consulting a financial advisor.

Who are you and why did you write this?

My name is Hanna King. I’m a data scientist and researcher living in Brooklyn, NY. I used to work in finance, at a quantitative hedge fund, and I used to help run my neighborhood mutual aid group, Bed-Stuy Strong. I remember the 2008 recession, and what happened to us and our families — my hope is simply that this information can help ordinary people preserve their savings.

Disclaimer: This is not financial advice. I am not a financial advisor, and definitely not your financial advisor. Everyone’s situation is different — I’m simply hoping to give you more information to consider when making decisions during this stressful time.