MINNETONKA, Minn. (WCCO) — It’s not just the temperature that keeps dropping. The stock market took a plunge today, too.
The Dow dropped more than 600 points, which is more than 2 percent. This caps off a tumultuous three weeks of twists and turns. But the recent volatility doesn’t mean long-term investors should worry, experts say.
In the stock market world, the word “discipline” means staying the course through the ups and downs. That can be difficult, especially when the Dow plummets like it did Monday.
“If you log in and you look at your 401k and you see it dropped two, three, four percent and you see the real dollars and you know how long it took you to put those dollars in there – boy, that can hurt,” said Justin Halverson, partner with Great Waters Financial.
He said a correction in the market, even one up to 10 percent, was expected.
A stronger U.S. dollar, tensions with trade wars and stock drops with tech companies like Apple were to blame. But that doesn’t mean it’s time to sell.
“If you’ve got cash on the sideline and the markets are down, I would view that as a buying opportunity if you have the time horizon to sustain that for the long haul,” he said. “If someone’s younger – in their 20s, 30s, even 40s – they’ve got enough time on their side where even if the market goes down, it eventually will come back. And as long as they keep investing on the way down, they’ll have more shares when it comes back up and they’ll have more to show for it.”
To better know the future, Halverson reminded us of the past, citing a graph of the market’s movements going back five years. It showed a steady increase for investors, with the daily or weekly drops in stocks looking more like speed bumps along the way. When it comes to the short-term losses, he said, “You’re just giving back some of the gains that you’ve incurred. You’re not really losing any of your money.”
Which brings us back to discipline. Halverson says don’t let fear or greed lead you to make an emotional decision.
“If you like the gains, you’ve got to be willing to deal with the losses occasionally,” he said.
If investors are nearing a period in their lives when they might need their money sooner, such as retirement, Halverson had a different outlook for them. Minor adjustments, or allocating their money into a stock with lower risk, could be in their best interests.