Just a few weeks ago, the stock market was hitting unprecedented highs. Today, the S&P 500 closed at $5,427.13, the lowest since early June. Should you be worried? The answer is complicated, but probably not.
Ebbs and Flows
The market is going to have natural ebbs and flows as the economic environment around the United States and other countries changes. Over the past few years, we’ve seen high inflation rates, especially in the United States, along with high interest rates. Fortunately, the inflation rates seem to be slowing over the last few months. However, as reported by the Wall Street Journal, Wednesday led to massive sell-offs in the market, leading to billions of dollars being lost. Tesla (TSLA) has been hit particularly hard over the last few days, dropping to $215.99 after $263.26 just a couple of weeks ago.
It is important to understand that the ebbs and flows of the market have been consistent over time, ever since the market has been around. The big drops that last several months, or even years, are those that can leave a long-lasting impact.
How the Market Impacts Everyone
If you are one to constantly look at your 401(k), then likely you are seeing your current balance in red with a -% next to it. This can be terrifying, especially when these savings accounts have hundreds of thousands of dollars in them. But what you are likely not seeing, is that over the last several months, the stock market has continually climbed upwards with a few dips.
Because of these dips, we see hundreds (or thousands) of dollars removed from our retirement and savings accounts. This can be scary, and you might think to take some of the money out of these accounts so you don’t lose more money. If you make this choice, you will guarantee a loss, and lock in the money lost over the last few days. You also remove risk from the market dropping more. However, if you keep your money in the market, while you risk losing more money, you also keep the investments alive, so when they likely increase, any loses are erased.
What to do Now?
When you see the days of markets slipping, it can be easy to quickly make a reaction. Most long-term investors recommend leaving your money in your account. Unless you’re looking to increase your investments while the prices are lower, ignoring your accounts can not only prevent you from making a mistake that could cost you tens of thousands, but it could also give you mental relief. Constantly watching the stock market is rarely a recipe for success, unless your constantly moving money in an out.
