You may be tempted to move your investments to cash in light of the more than 1,100 point-drop the Dow Jones industrial average suffered in one day that put the index in correction territory.
Yet financial advisors say you shouldn’t let this development spook you from staying the course when it comes to your investment goals.
“This is very healthy,” said financial advisor Paul Pagnato, founder and CEO of PagnatoKarp in Reston, Virginia, noting that the long-term outlook for the economy, market sentiment and world stability remains the same. “We’re long overdue for a market correction,” he said.
While those numbers look stark, it’s important to put them in the context of how far the market has climbed, said Scott Hanson, founder and senior partner at Hanson McClain Advisors in Sacramento, California.
A 250-point drop for the Dow today is only about a 1 percent decline, Hanson said. But that same drop when the Dow was at 10,000 would have been a 2.5 percent fall.
At the same time, there’s usually a 10 percent dip at some point every year, Hanson noted. It has been two years since we have seen such a decline.
But if the sight of your account balances still makes you queasy, here’s what you need to remember.