If the stock market plummets, when should you panic?

When you have a stock market free-fall like we did on Monday, you don't need to panic-- but may need to re-evaluate your financial plan/asset distribution.
By Susan Konig | Feb 08, 2018
When the Dow Jones Industrial Average dropped 1,175 points Monday in the worst one-day point drop on record, more than a few investors were panic-stricken. But the degree of panic was likely directly related to when the investor anticipates needing his money.

For example, people who don't plan to retire for years are typically advised to relax and stay put. But should those oat or near retirementor those anticipating cash needs in the near future (IE: for a home purchase or college tuition), be advised any differently?

The short answer appears to be "no." Barbara Levin of San Diego a former financial advisor notes that the market was already recovering on Tuesday with an increase of 569 points. Levin, who is retired herself, says people need first and foremost to relax and be certain they have a solid financial advisor and plan in place.

Levin has been on the receiving end of countless calls from panicked clients over the decades? including those who truly took a beating during the Great Recession of 2008.She said that what happened this week served as "a good reminder about the basics of investing in the stock market.

"Invest for the long-term and keep cash handy for the short-term," she advises. "If you have a college tuition bill or big household expenses coming due, keep enough cash liquid to pay for your short-term expenses. But the rest of investing is just about buckling up and riding the waves. As you get older, your investments should be less risky."

But, many people in their 60s, example, still likely have some substantial investment years ahead of them, she says. "These folks have plenty of opportunity to recover from these types of market drops," she said. The key, however, is staying invested.

Remember, if you were invested even just a few months ago, she notes, there's an excellent chance you're still ahead of the game, despite two days of falling prices.

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