Advice: When the Stock Market Drops, Stay Calm and Do Nothing There is no reason to think that you can predict what will happen in the markets in the next few hours or in the near future. It’s better not to try.
By Ron Lieber - Aug. 5, 2024 NYT 10:58 a.m. ET
The markets are in turmoil, but you know what you’re supposed to do now, right? Let’s all take a deep breath, tie our hands behind our backs and say it together: We will not sell stocks in a panic. We will, in fact, do nothing at all right now.
Many of the people who are trading today are professional investors of various sorts. Here’s a dirty little secret about, say, hedge funds: All of their trading in reaction to world events doesn’t lead most of them to
do better than sticking their money in an index fund that tracks the stock market. Mutual fund managers
don’t do much better.
So there is no reason to think that you can predict what will happen in the markets in the next few hours or in the near future. It’s better not to try.
Remember, much of the money you have in the stock market is probably for retirement anyhow. Chances are, you won’t need it for many years or even decades.
But rational thinking often eludes us in moments like this. So here are a few things that may make you feel better.
First, look at the performance of your investment portfolio over the last year or three or 10. Chances are, you’ve made a lot of money if you’ve invested regularly and then left things alone. Nice going! Try to think about those enormous gains and not any smaller paper losses from today’s drop.
Second, consider the early days of the pandemic, when stocks fell by more than a quarter in the space of a month or so. Who would have thought that within a year, market gains would wipe out those losses and then some? But that’s what happened.
Finally, and as ever, you are not the market. You are the sum of many large parts, including home equity and future salary, not to mention the immeasurably high returns that come from friends and family and playing outside and taking in art.
Go fly a kite or wander among beautiful buildings and check in with the market again tomorrow.