Over a three day losing streak, the S&P 500 dipped more than 6% before rallying again Tuesday, up 1.6% in midday trading.
“This is what an emotion-driven market looks like,” said Mark Hackett, head of investment research for Nationwide. “You had a three day period that was really very challenging. But the drop was not justified by the data that was out there, which is why you then have a day like today.”
For everyday people, what are the best ways to handle market volatility? The top advice is to do nothing, but ultimately your response depends in part on your circumstances and financial goals.
WHAT TO DO IN GENERAL
“It’s important to remember that investing in the stock market is a long game. There’s going to be volatility, so be wary of having a knee-jerk reaction and pulling your money out at the first sign of a drop,” said Courtney Alev, consumer advocate for CreditKarma. “Selling stocks frequently or incrementally can come with fees for each transaction and those can add up fast.”
Caleb Silver, editor in chief of Investopedia, echoed this, cautioning that sellers may also end up owing taxes on any gains.
“For everyday investors, volatility is the price you pay to be invested in the stock market,” Silver said. “But it’s very unsettling when we see big market drops of two to three percent... It’s a little unnerving for people who have their money in 401(k)’s or IRA’s or retirement funds to watch this magnitude of volatility.”
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