Dow Goes Free Falling On A Scary Afternoon
Scary, scary times, people. This afternoon, the Dow Jones Industrial Average plunged more than 900 points in less than an hour, after already having fallen in a more desultory pattern earlier in the day. Everyone's worried about the euro, the terrorists, the oil spill, floods, the deficit, the prospects for a double dip recession, a summer slump. Traders couldn't get out fast enough.
But by the time most people noticed -- ten minutes later -- it had recovered almost 600 of those points. It ultimately ended the day at 10,513, down 355 points, or 3.27 percent.
It could have more to fall or not, depending on which analyst you ask and what time frame you ask about. (Don't be surprised if there's some after-hours selling tonight.) But panicky selling or buying isn't the way to go for most investors. Here's how to make sense, and a few dollars, out of today's debacle.
- Don't try to out-trade the traders by timing the market. You just will not win that game. Little guys get whipsawed by big computer trades, and if you had tried to sell this afternoon, you most likely would have had your shares pulled out nearer the bottom of that slide than the top.
- Breathe. Long-term investors already know what percentage of their portfolio is supposed to be in stocks. If you keep that percentage steady -- and avoid even watching the market on bloody days like today -- you'll do okay over the long term. If you are still investing money you'll need next month in the stock market, stop. That's what banks are for, not stocks.
- Test your broker and your advisor. If you tried, were you able to get into your account this afternoon? Did the website for your online broker work? Were your trades made quickly and accurately? What about your financial advisor? Did you get him or her on the phone? What did they say? You pay them to hold your hand on days like today, so if you didn't get any hand holding, look elsewhere.
- Don't get complacent in this trigger-happy market. Look over all of the individual stocks you own. Have they had huge gains relative to their earnings? This is not a market that's going to let companies coast. If something used to be a good stock, but it got overpriced, let it go. You shouldn't sell maniacally into a sell-off, but spring pruning can be a good idea.