The stock market is bad. What should you do?

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The stock market is bad. What should you do?

The stock market has been on a bit of a roller coaster the past couple months and, as of Tuesday, the S&P 500, NASDAQ and Dow Jones Industrial Complex had fallen nearly 8% in December. The collective drop has stoked fears that the next recession is on the horizon.

“Investors are really starting to question, ‘Could this really be it?’” says Dennis Nolte, certified financial planner and vice president of Seacoast Investment Services.

Watching this year’s investment gains get erased is certainly unnerving, but what should you do when markets turn volatile?

First, don’t panic.

“Get an emotional check on where you are, and think practically before you act,” Nolte says.

To a certain degree, stock market dips are expected. Corrections of 10% or more during the market cycle are perfectly normal and happen “all the time", says Robert Braglia, certified financial planner and president of American Financial & Tax Strategies.

Should you sell of your stocks?

The short answer: No.

“The best thing often is to do nothing,” Braglia says. “The challenge in doing nothing is our emotions.”

A little planning can subdue worries about what is mostly out of your control. Revisit your original investment plan and get re-organized, Braglia says.

If you want to take action, your best bet is diversifying. Make sure you have a balance of high-to-low risk investments, Nolte says. This mix gives you some security against the market’s ups and downs.

If you're nearing retirement, consider switching the bulk of your portfolio to safer investments with a lower rate of return, he adds. Your options include bonds or certificates of deposits, depending on how close you are to those happy golden years.

If you haven’t already, consider reaching out to a financial professional. They can explain the nature of the markets, give you advice on where to invest and help organize your finances.

Other ways to protect your nest egg

If you're worried about broader money matters, there are ways to prepare for the next recession. Draft a tighter budget and start paying down outstanding debts at a faster clip. Be sure, too, to start an emergency fund. (Our partner Even Financial can help you compare competitive saving account offers.)

Curious what professions are recession-proof? Here are 16 careers that are predicted to survive the next economic slump.

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Image: DaniloAndjus