Buzz
The stock market is dipping, and you’re wondering if now’s the moment to buy, sell, or just sit on your hands. What should you make of this downturn?
First things first: No one can predict exactly what will happen next. But in context, the dip in the Dow isn’t as dramatic as some might think, especially when compared to the significant gains we’ve seen recently. Headlines yesterday were all about the point loss, but it only dropped by 4.6 percent, while the S&P 500 fell 4.1 percent—certainly not a crash, though it may feel abrupt after such a strong year. Last year was a banner year for stocks, so a correction was expected, and none of this is completely shocking. Financial experts and analysts have been warning about the eventual end of this historically long bull market for more than a year (though we’re not there yet). And while the market will eventually dip, it’s always bounced back in the past.
Second: Everyone’s situation is different. If you need to access your money soon—say, within the next five years—you might want to consider shifting to safer investments than stocks. But if you’re investing for retirement through a 401(k) or IRA, and your retirement is a decade or more away, this market blip likely doesn’t have much impact on your plans. Stick with your long-term investment strategy and keep saving consistently over time. As Kristina Hooper, Invesco’s Chief Global Market Strategist, puts it:
Focus on maintaining a well-rounded portfolio.
For many investors, this might involve more than just stocks and bonds—it could also include a portion in
alternative investments
.
Stay calm and avoid rash decisions.
Regardless of the market conditions, maintain discipline and continue saving and investing based on your long-term goals.
You can increase both your retirement and emergency savings. “Don’t worry about short-term market swings,” advises Nick Holeman, CFP at Betterment. “Keep saving toward your goals through both good times and bad. While you can’t control the stock market, you can control your savings rate and how you respond to market shifts.” Think long-term.
However, it’s a good idea to revisit your asset allocation and “test your risk tolerance,” as Penny Wang suggests in Consumer Reports, especially if you set your portfolio up some time ago.
Of course, you’re free to buy if you wish—whether through an app like Robinhood or a taxable account—but remember, investing 101 says to avoid trying to time the market (unless your goal is to sell quickly for tax purposes). “It’s essential to remember how small this dip actually is,” says Holeman. “In reality, it just brings the market back to where it was at the start of the year. That’s hardly a dip, if you ask me.”
As noted earlier, you likely have a financial plan in place—don’t alter it just because stocks have had a minor dip.
