Don’t Panic During Stock Market Slump

October 12, 2018
749 Views

If the current slump in the stock market has left you in limbo with your investments, you are not alone. Millions of long-term investors are seeing recent gains slide away from their portfolios, as the market suffers its worst decline since February of this year.

While a rebound is highly likely, this doesn’t necessarily help when considering what to do with your free cash in the meantime. Here’s some advice and reassurance as you weather what could be the most volatile month of the year.

Clear Some of Your Existing Debt

If you have free flow cash available, then you could divert it to debt repayment instead of waiting for stock market to recover. Now could be the perfect opportunity to reduce your debt, potentially increase your credit score, and save money on interest payments.

It would be beneficial to pay even a small amount towards a credit card, mortgage, or loan.

Invest Your Money in a Certificate of Deposit or Stock Market 

If you are on top of your debt but still have free cash, then a Certificate of Deposit would be a safe investment with a moderate return. FDIC insured accounts are guaranteed up to $250,000, so you literally can’t lose money on this type of investment.

Some banks are offering as much as 3% APY on deposits of $500 or more for 23 Months. Even a 12-month deposit will return at least 2.6% APY with most major banks.

Don’t Read Too Much into the Alarming Headlines

Take the financial headlines for what they are this week. Look at the facts but avoid the negative commentary that could send you into a period of financial anxiety.

Indexes are down, that is a fact. However, long term investors are still profiting when looking at the bigger picture. October is traditionally a volatile period for stock market , and interest rate increases this year have made that volatility even worse.

Byron Wien, the Vice Chairman of The Blackstone Group (a highly reputable financial advisory firm) said on Wednesday that this current slide is “a correction in an ongoing bull market and I think the market goes higher at year-end.” Wien specifically pointed to the likelihood of a strong market rally after the November mid-term elections.

We’ve Been Here Before

The first quarter of this year was hit by high levels of volatility. The doom and gloom headlines of early 2018 were then swept away by a period of massive growth, even in the face of trade tensions and other factors.

Current slides are significant and should not be ignored, but to lose faith in the market would be a mistake. Historical data shows that an uptrend is likely to emerge.

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