What to Do During the Stock Market Frenzy
The stock market is dropping and you think this is a good time to shop. Or you are convinced that you should be selling. Or you just do nothing and get on with your day. What should we do with all this?
First, nobody knows what will happen. Really. But for some – that point of view, the fall of the Dow is going through that crazy, especially when compared to the recent growth. Yesterday’s headlines were about a point loss , but it was down 4.6 percent, while the S&P 500 fell 4.1 percent – not a crash, although it is sharp after a year of growth. Last year has been a great year for stocks. Naturally, there will be adjustments, and none of this will come as a big surprise. Experts and financial writers have warned of the end of the historically long bull market for over a year (not that it’s not over yet). And although it will end, the market has always come back up.
Secondly: it is different for everyone. If you need money soon (say, five years or less), then you might consider transferring it to something safer than stocks. But if you’re solely investing through a 401 (k) or IRA for retirement ten or more years from now, that still doesn’t mean much to you. Stay on course and stick to your long term investment plan. The best thing you can do is save money regularly over a long period of time. For most people, according to Christine Hooper , chief strategist at Invesco Global markets, this means:
- Maintain wide diversification. For many investors, this may include not only stocks and bonds, but also deductions to alternatives .
- Don’t be afraid or impulsive. Be disciplined regardless of the market environment and keep saving and investing in line with your long-term plan.
You can also boost your retirement and emergency savings. “Never mind short-term market fluctuations,” says Nick Holeman, CFP at Betterment . “Keep saving to achieve your goals in both good and bad times. You cannot control the stock market, but you can control how much you save and you can control your behavior. ” Take a look into the distance .
But you should look at your asset allocation and “stress test your risk tolerance,” as Penny Wang writes in Consumer Reports , especially if you’ve built your portfolio a while back.
You can of course also buy freely – and I mean stocks through an app like Robinhood or a taxable account – although Investing 101 says you shouldn’t try to calculate the market (and unless your plan is to try to sell it immediately because taxes ). “It’s important to remember how small the drop is,” says Holman. “In fact, this brings the stock market back to its value around the beginning of the year. If you ask me, this is hardly a failure.
As mentioned above, you probably have a financial plan – you shouldn’t change it because the stock has dropped slightly.