4 'Safe' Money Habits That Hurt You in a Downturn
Technically, the stock market isn’t in a full-blown downturn in 2026 — at least not right now.
A recent rally pushed the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite back into positive territory for the year after each spent months in the red. Still, with ongoing geopolitical tensions and economic uncertainty fueling volatility, conditions could shift quickly.
Read More: 10 Bad Money Habits You Need To Break
Find Out: 5 Signs You’re Losing Money Every Month — and How To Find the Leaks
When markets get shaky, many investors instinctively turn to “safe” money habits. The problem? Some of those habits can actually do more harm than good.
Here are four common “safe” moves that can backfire during a downturn.
1. Panic Selling
Understandably, investors want to sell stocks and other assets once those assets start plummeting in value. But while this seems like the safe move, in reality, it could be the "single most damaging thing" an investor can do, according to a blog from Morgan Stanley.
"Selling into a falling market ensures that you lock in your losses," Morgan Stanley noted. "If you wait years to get back in, you may never recover."
2. Clinging to Assets for Too Long
While you don't want to panic sell, you also don't want to hold onto an asset beyond the point when doing so makes sense. This often happens during downturns because investors are frozen by fear and are convinced it's safer to just do nothing.
When deciding whether it's time to sell, Sierens Financial Group recommends weighing two key factors: the long-term prospects of that stock or sector, and the potential upside of harvesting a loss to take advantage of tax benefits.
"If your holdings in a taxable investment account are declining and not well-positioned for long-term gains, you may want to harvest those losses to offset future gains from stocks that are rising and are better positioned for the current economic and market environment," Sierens noted in a blog.
3. Hoarding Cash
Nothing seems safer than keeping your money in FDIC-insured cash accounts that carry no risk of loss of value.
But as Morgan Stanley pointed out, keeping too much money in cash means you miss out on market recoveries. Since it's impossible to time the market and get back in at just the right time, you're better off keeping your money invested.
4. Sitting on the Sidelines
Another presumably "safe" habit in a downturn is to sit on the sidelines and just stop investing. But it's also another harmful habit. As Ramsey Solutions explained it, in a down market, "it's often time to buy -- not sell."
One reason you should buy stocks or other assets in a downturn is that you can get them at comparatively cheap prices. Downturns don't last forever. Once they end, your assets will go up in value again.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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