S&P 500 Sell-Off: 1 Investing Step to Take Right Now, and 1 Risky Move to Avoid

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Don’t sell in a panic

Admittedly, it’s easy to tell someone they should stay the course when they’re seemingly losing money by the hour or day. In practice, it can be hard to sit on your hands when you see your investments drop. After all, why not sell today and buy back shares once they’ve finished falling? In theory, that sounds good, but it presents two problems.

The first problem is that we can’t predict how the stock market will move in the short term, and investors are historically bad at timing the market (like, really bad). If you sell shares expecting further drops and prices then rebound, you could miss out on valuable gains.

For perspective, simply missing the S&P 500’s 10 best days in the 30 years between 1995 and 2025 would’ve cut your gains in half during that time.

The second problem is that you could incur an unexpected tax bill if you sell your shares at a profit. If you’ve held the shares for less than a year, your capital gains will be taxed at your regular income tax rate. If you’ve held them for at least a year, you’ll get the more preferential capital gains tax rate.

Any profit is good profit, but don’t forget Uncle Sam will always want his cut. Unless you absolutely need the cash, those shares are likely better off held for the long haul. The S&P 500 has bounced back from every sell-off, correction, crash, and bear market it has experienced. I don’t see that changing anytime in the near future.

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Stefon Walters has positions in Apple, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Micron Technology, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

S&P 500 Sell-Off: 1 Investing Step to Take Right Now, and 1 Risky Move to Avoid was originally published by The Motley Fool