Trader Gregory Rowe works on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. NEW YORK — U.S. stocks are bouncing back after the market experienced its worst day in two years on Monday, but the average investor may still be understandably spooked. Over a three day losing streak, the S&P 500 dipped more than 6% before rallying again Tuesday, up 1.6% in midday trading.
Caleb Silver, editor in chief of Investopedia, echoed this, cautioning that sellers may also end up owing taxes on any gains. “You’re reducing the average price you pay for the securities, stocks, mutual funds, or index funds that you own ,” he said. “So when the market itself reverts to the mean and rises again, you take advantage of having bought at cheaper prices, and that adds to the value of your portfolio.”
Nationwide’s Hackett said it makes sense to periodically rebalance the exposure one has in their portfolio in general – whether quarterly or annually – to make sure there isn’t more risk than one would want related to, say, technology stocks or another sector.