Investors coped with another wild day on the stock market, with the Standard & Poor’s 500-stock index closing down nearly 4 percent on Monday.
But despite the unnerving fluctuations in the past few days, experienced financial advisors say the best way for average consumers to deal with stock market jitters may be to do nothing at all.
The recent market volatility has been sparked, in large part, by investors’ worries over China’s economic slowdown.
“We use to say when the U.S. sneezes the world catches cold," CNBC financial contributor and former money manager Ron Insana told the I-team. “We’re worried about the same thing now with China they’re the world’s second biggest economy.”
But Insana says China’s financial illness is not a terminal diagnosis for average American investors, unless they need access to their money immediately.
“If you have money in the market that you needed tomorrow, or you need next year for a down payment on a house, it should never have been there in the first place, in which case it’s probably wise to get out,” said Insana.
If you have a 401K, and don’t expect to retire for a few years — or decades — Insana says “this is a time where you just go ahead and continue that process putting in the same amount every month.”
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Insana suggests taking the same approach when it comes to 529 plans, which help families set aside tax-advantaged funds for future college expenses.
If your child is in elementary school, history suggests it’s safe to leave your 529 investments alone during market ups and downs.
However, if you have a high school senior at home, “as you get closer to wanting that cash, you should be pulling away from riskier investments,” Insana said.
If you feel you can’t handle the rough-and-tumble of the stock market during volatile times, you may want to consider safer investments, like cash or certain bonds.
Otherwise, try to relax, and remember: playing the market is a long game. History suggests that if investors “stay calm and carry on,” stocks can prove to be the best strategy for growing money over time.