When the Stock Market Tumbles… 6 Tips for Investors

New York Times columnist Ron Lieber offers six important tips to keep your investing wits during a volatile market.

The impulse when the stock market falls hard for a few days in a row is to do something. Anything. Our life savings are often on the line, after all. But that’s the idea: Stocks are most useful for long-term goals. So unless those goals have changed in the last few days, it probably doesn’t make much sense to overhaul an investment strategy based on a blip of market activity.

Consider the following points.

1. You Are Not the Stock Market

Chances are, your portfolio is a diverse mix of investments. While stocks may be falling, you probably also have some bonds and cash. Perhaps there are some real estate mutual funds, too. Then there’s your home equity if you own a home, not to mention the value of your future earnings. These things probably won’t all fall simultaneously.

2. You May Have Done Quite Well in Stocks

If you were in stocks from 2009 to 2015, or in the 1990s or consistently since the early 1980s, you are most likely a big winner. It’s generally a bad idea to look at your investment statements too often, but take a quick peek at your long-term performance. That outsize gain you see is one reason you were in stocks in the first place.

Plenty of research shows that if you miss just a few days of the market’s biggest gains, your long-term portfolio will suffer badly. If you decide to put a lot of your money in cash right now, how will you know when to get back in the market? You’ll probably be looking for a sign, and that sign will be the rebound days on which you missed out.

3. Your Goals Probably Have Not Changed

At some time in the past, when you were not scared, you made a decision to construct your portfolio a certain way. You knew that stocks involved risk and that the returns they have traditionally delivered, above and beyond what cash and bonds do, was the reward for your persistence.

Nothing about recent market events suggests that the fundamentals of capitalism have changed. So neither should your confidence in very long-term ownership of the pieces of the for-profit enterprises that benefit from your fortitude.

4. Most Investors Have Plenty of Time to Recover

Too many 70-year-olds sold all of their stocks in 2009 and are healthy enough to live to 100. They would be going on a lot more vacations now and be worrying less about long-term care if they had held firm.

Worried about a 529 college savings plan for a 12-year-old? Let’s hope you weren’t 100 percent in stocks with six years to go before needing money for tuition. Still, you have at least nine years for a portion of that portfolio to recover from any sustained downturn.

5. Some People Cannot Handle the Stress of Stock Investing

Maybe you are one of them. But try to give this more time, and consider the alternatives. There are few investments that can deliver the kinds of returns that stocks can without their own accompanying anxiety. An alternative is to save a lot more in safer investments like cash or certain bonds. Most people don’t have enough income to do that easily, so settling for lower returns will mean a combination of working longer and living modestly. For some people, that is a fine trade-off.

6. Dear New Investors: This Is Just What Markets Do

There is absolutely nothing abnormal about what is going on here. Most of us have to save somewhere, and history suggests that stocks are the most accessible route to getting the returns you will need to retire someday. It would take decades of systemic economic erosion to prove otherwise, and a few days of market declines do not suggest that anything like that is upon us.


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