Trader Gregory Rowe works on the floor of the New York Stock Exchange, Monday, Aug. 5, 2024. , 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.
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.“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.
Silver urged investors to remember that “a market falls into a correction, ten percent or more, once a year on average,” and that “usually the market reverts to the mean, and the mean is an average annual return of eight to ten percent a year going all the way back to the 1950s.”For younger people just beginning to invest, declines in the stock market are an opportunity to add to your portfolio at cheaper prices, by buying in when the market is falling or has fallen a lot, according to Silver.
In terms of selling, though, he said the best advice for most investors is to do nothing and wait for the volatility to cool down.“Whenever you invest in stocks it’s important to be mindful of your time horizon,” said Alev. “For instance, do you expect you’ll need to liquidate in the near future? In that case, you’re likely better off opting for a less volatile and more risk-averse mode of growing your money, such as a high-yield savings account.
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