How to survive the market's wild ride

Bette Davis wasn't talking about the U.S. stock market when she uttered "Fasten your seat belts, it's going to be a bumpy night" in the 1950 classic film "All About Eve," but the metaphor is certainly apt.

The Dow Jones industrials, the index that for many investors symbolizes the stock market, tumbled 470 points today as traders reacted to worries about a slowdown in China's economy and concerns about the timing of the Federal Reserve's decision to raise interest rates. That was a 2.84 percent plunge, landing the blue-chip index at 16,058.

The Nasdaq composite plummeted 141 points, wiping out its gains for the year. That marked a 2.94 percent drop, putting the tech-heavy index at 4,636 at day's end. The S&P 500, the index most professional money managers follow, dropped 58 points, or 2.95 percent, to close at 1,914.

According to Edward Jones investment strategist Kate Warne, investors should expect more of the same.

"We're much more likely to keep seeing triple-digit moves in the Dow because of the level the Dow is at," she told CBS MoneyWatch. "While investors all remember when the Dow was at 8,000. With the Dow at 16,000 or so, we are much more likely to see triple-digit point moves both up and down. It's hard to stomach large point moves, but putting it in perspective is important."

In fact, many experts consider the market's latest gyrations to be normal and note that the recent lack of wild price moves was atypical. In a blog post published on his company's website, Vanguard chief investment officer Tim Buckley argued that stock markets usually experience a drop of 10 percent or more, dubbed a "correction" on Wall Street, every 18 months. But the last correction in U.S. stocks occurred in October 2011.

That's why Buckley is among those urging investors not to act rashly because of recent price moves. "You need discipline to stick with a well-established long-term investment plan and courage to endure short-term volatility," Buckley wrote.

Indeed, many individual investors appear to be taking the current wild ride in stride. Edward Jones reports an increase in calls from investors in the past two weeks, but Warne noted that most have come from investors seeking additional information and don't indicate any panic.

Vanguard also experienced what it considered to be a "manageable" spike in customer calls, similar to what it sees during the height of tax season, said Linda Wolohan, a company spokeswoman. And Ameriprise Financial spokesman Chris Reese said, "Ameriprise did see a spike in client activity and a majority of that activity was buying."

"This is a situation where you don't want to let your emotions get the best of you. Instead look for bargains that may appear," Craig Brimhall, vice president of Wealth Strategies for Ameriprise, said in an email to CBS MoneyWatch. "Although the recent market conditions may put a dent in consumer confidence, they are certainly not cause for panic and shouldn't be unexpected considering the run we've had."

Indeed, investors have several reasons to keep an even keel. First, U.S. growth was a stronger-than-expected 3.7 percent in the second quarter, though the consensus sees it moderating to a 2.7 percent increase in the second half. Still, that's well-above the 0.3 percent increase seen in the eurozone and the 0.4 percent contraction in Japan.

U.S. unemployment has fallen steadily in recent years and was 5.3 percent in July. Friday's jobs report is expected to show an small rise to 5.4 percent in August, but forecasters see joblessness falling to 5.1 percent by year-end.

Taking an even longer-term view, many experts caution investors against abandoning the market. The average annual gain on stocks has been between 7 percent and 9 percent since World War II, far better than other classes of investments.

LPL Financial is even sticking with its call for a healthy rise in stock values for this year. "We reiterate our forecast for stocks to produce mid- to high-single-digit returns in 2015," said Burt White, chief investment officer, in a statement.

Among the potentially supportive factors LPL cites are: "1) better growth in Europe and Japan (along with the potential for more stimulus), 2) low interest rates that make bonds relatively less attractive than stocks, 3) a Federal Reserve (Fed) that may keep rates "lower for longer," 4) low but stable oil prices, 5) historically strong fourth quarter seasonality, and 6) price-to-earnings multiples that have fallen to long-term average levels."

Still, that doesn't mean it'll be anything like a smooth ride from here, so keep that seat belt fastened.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.