The Dow plunged 500 points last Friday and roughly 1,000 points since the beginning of last week. All three market indices (the Dow, S&P 500 and NASDAQ) now are at a loss for the year. So there is a lot of panic going on in the financial world, naturally. If you click on a myriad of articles from major news sources such as Wall Street Journal, Market Watch, NBC or CBS, you’ll find that they are predicting more losses this week.
So what’s happening with the Dow? Factors that contributed to last week’s plunge were the devaluation of Chinese currency and a forecasting of economic slow-down in China, low oil prices, the Fed’s indication that interest rates may rise soon, among other things. We’ve also been in a bull market for over 6 years, which is a decent length of time as bull markets go. So wondering when a correction would hit has been on many people’s minds.
What Do We Do?
Don’t panic. And while you’re at it, don’t check your 401k balance either. Out of sight, out of mind. Do what I like to call a “self-control exchange”, where you exhibit self-control in one aspect of your life and reward yourself by loosening up somewhere else. So before you log onto your online brokerage account, pour yourself a glass of wine or grab a piece of good chocolate and go distract yourself with the Bachelor in Paradise. Because this too shall pass. And studies have shown that your portfolio will fare much better if you do nothing when times get turbulent vs. trying to time a market crash and then figuring out when to get back in. That is what the Buy and Hold strategy is all about. And while it may be difficult when the rest of the world is panicking, classy ladies know how to stay calm under pressure – so we got this. Now I need to go, before I get too weak and log on to Vanguard.