How to stay calm when markets are bumpy: A roundup of expert advice

"Markets have a long track record of rewarding patient and disciplined investors."


Seeing the market swing is never easy — and there's been plenty of action for investors to watch. On Monday, the S&P 500 fell 1.7% for its worst performance since May. The Dow Jones Industrial average fell 614 points, or 1.8%, its biggest one day drop since July 19. The tech-heavy Nasdaq Composite dropped 2.2%.

The situation wasn't much better for the crypto crowd: Popular digital currencies bitcoin and ethereum were down about 8% and 9%, respectively, by the time stock markets closed. Around midday, they were down by double digits.

To put things into perspective, September has the worst track record of any month, according to the Stock Trader's Almanac. And there are lots of other events experts point to to explain the sell-off:

  • The Federal Reserve starts its two-day policy meeting on Tuesday. The central bank could signal it's ready to start pulling back on economic stimulus.
  • There's partisan gridlock in Congress as lawmakers rush to pass funding bills to avoid a government shutdown.
  • A massive property developer, China's Evergrande property group, is on the brink of default, which could have global economic implications.
  • Concerns over rising Covid-19 cases, as the delta variant causes infection rates to increase, which could cause the economy to slow down.

Luckily, experts say, you can be confident in the planning that you have done and focus on taking the long view. During stock market downturns, "oftentimes, the best course of action is no action," Bankrate Chief Financial Analyst Greg McBride told Grow in July. "Just sit tight and ride out the volatility. Markets have a long track record of rewarding patient and disciplined investors."

When stocks were down double digits amid peak Covid-19 panic, legendary investor Warren Buffett repeated his longstanding view on investing: "You don't buy or sell your business based on today's headlines," Buffett told CNBC in an interview that aired February 24, 2020.

Why a stock market 'sell-off' doesn't mean you need to sell

Over the last 20 or so years, the S&P 500 produced an average annual return of around 6%.

Even in a volatile year, staying invested pays off. Take 2020, for example. It was an unstable year for investing, so many investors were tempted to get out of the market. If you had invested $100,000 on January 1, 2020, but missed the top 10 trading days, though, you would have had $51,256 less by the end of the year than if you'd stayed invested the whole time, according to an analysis by Charles Schwab.

That's why it can be smart to resist the urge to sell during periods when the market and stock prices are falling, experts say. Panic-selling only locks in your losses. Taking money out of your investments during a dip means missing the upside when the market recovers, so it's important to have a long-term strategy that can weather change.

"Stocks are long-term investments, and those holdings belong to your future self, not yourself today," McBride said in July.

Why you shouldn't panic when markets are bumpy

Video by Stephen Parkhurst

Warren Buffett: The long-term success of U.S. stocks is 'very easy to predict'

Warren Buffett doesn't think "there's any way to predict" what the market will do in the coming weeks or months. But he's confident in the long-term outlook, he told CNBC during the Covid-19 fueled sell-off in February. "I can come to a pretty firm conclusion that 20 or 30 years from now, American business — and probably all over the world — will be far better than it is now," Buffett said.

With that in mind, he says, investors are wise to embrace the buying opportunities that come from lower prices.

What to do with your 401(k) when the stock market gets bumpy

Investors who stayed invested during the pandemic were rewarded for their patience. The average 401(k) account balance increased from $74,000 in 2019 to $81,000 in 2020, Bank of America's Financial Life Benefits Impact Report revealed in May.

"Maintaining contributions to retirement despite the uncertainty and disruption of a pandemic, and holding investment allocations steady amid the volatile markets, paid off for savers last year, with average balances on the rise," McBride told Grow in May.

When it comes to your retirement accounts, making some smart moves now, along with creating a plan for when the market gets bumpy, can help calm your nerves and set you up for success.

Personal finance coach stopped investing in 2020: How she got back on track

Video by Courtney Stith

The upside of downturns: Why now is a great time to start investing

If you're new to investing, getting started can feel daunting given recent market news. But now is actually a great time to begin investing, experts say.

"The stock market is the only place where things go on sale and people run out of the store screaming," Ryan Detrick, chief market strategist at LPL Financial told Grow earlier this summer. "Use weakness as a buying opportunity."

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