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NEW YORK (AP) \u2014 U.S.\u00a0stocks are bouncing back<\/a>\u00a0after the market experienced\u00a0its worst day in two years on Monday<\/a>, but the average investor may still be understandably spooked. Over a three day losing streak, the S&P 500 dipped more than 6% before rallying again Tuesday, up 1.6% in midday trading.<\/p>\n \u201cThis is what an emotion-driven market looks like,\u201d said Mark Hackett, head of investment research for Nationwide. \u201cYou had a three day period that was really very challenging. But the drop was not justified by the data that was out there, which is why you then have a day like today.\u201d<\/p>\n For everyday people, what are the best ways to handle market volatility? The top advice is to do nothing, but ultimately your response depends in part on your circumstances and financial goals.<\/p>\n \u201cIt\u2019s important to remember that investing in the stock market is a long game. There\u2019s going to be volatility, so be wary of having a knee-jerk reaction and pulling your money out at the first sign of a drop,\u201d said Courtney Alev, consumer advocate for CreditKarma. \u201cSelling stocks frequently or incrementally can come with fees for each transaction and those can add up fast.\u201d<\/p>\n Caleb Silver, editor in chief of Investopedia, echoed this, cautioning that sellers may also end up owing taxes on any gains.<\/p>\n \u201cFor everyday investors, volatility is the price you pay to be invested in the stock market,\u201d Silver said. \u201cBut it\u2019s very unsettling when we see big market drops of two to three percent\u2026 It\u2019s a little unnerving for people who have their money in 401(k)\u2019s or IRA\u2019s or retirement funds to watch this magnitude of volatility.\u201d<\/p>\n Silver urged investors to remember that \u201ca market falls into a correction, ten percent or more, once a year on average,\u201d and that \u201cusually the market reverts to the mean, and the mean is an average annual return of eight to ten percent a year going all the way back to the 1950s.\u201d<\/p>\n For younger people just beginning to invest, declines in the stock market are an opportunity to add to your portfolio at cheaper prices, by buying in when the market is falling or has fallen a lot, according to Silver.<\/p>\n \u201cYou\u2019re reducing the average price you pay for the securities, stocks, mutual funds, or index funds that you own (when you buy in a down market),\u201d he said. \u201cSo when the market itself reverts to the mean and rises again, you take advantage of having bought at cheaper prices, and that adds to the value of your portfolio.\u201d<\/p>\n In terms of selling, though, he said the best advice for most investors is to do nothing and wait for the volatility to cool down.<\/p>\n \u201cWhenever you invest in stocks it\u2019s important to be mindful of your time horizon,\u201d said Alev. \u201cFor instance, do you expect you\u2019ll need to liquidate in the near future? In that case, you\u2019re likely better off opting for a less volatile and more risk-averse mode of growing your money, such as a high-yield savings account<\/a>.\u201d<\/p>\n Silver agreed.<\/p>\n \u201cI don\u2019t believe it when people say, \u2018Don\u2019t look at your 401(k),\u2019\u201d he said. \u201cYou should absolutely look and see what you own and see that it matches your risk appetite.\u201d<\/p>\n If it doesn\u2019t, you can move your investments to products that can shield you from the ups and downs of the market or unforeseen events. Silver said that High Yield Savings Accounts, Certificates of Deposit<\/a>, and money market accounts are all currently seeing returns of about 4% to 5% for the more cautious or conservative investor.<\/p>\n Nationwide\u2019s Hackett said it makes sense to periodically rebalance the exposure one has in their portfolio in general \u2013 whether quarterly or annually \u2013 to make sure there isn\u2019t more risk than one would want related to, say, technology stocks or another sector.<\/p>\n \u201cIf your exposures get out of line with your long-term plan, get them back in line,\u201d he said. Even so, Hackett added that he sees the trend of tech stocks outperforming as one that may extend further into the future.<\/p>\n Experts agree that, for investors with debt, it\u2019s important to focus on paying off loans, especially high-interest ones, before making major investments. That said, \u201cif you are able to simultaneously pay off your loans and invest a little bit at the same time, you are effectively paying your future self for being responsible about your debt while growing your investments over time,\u201d Silver said.<\/p>\n<\/div>\n\nWhat to do in general<\/h4>\n
What to do if you\u2019re a young or new investor<\/h4>\n
What to do if you\u2019re near retirement<\/h4>\n
What to do if you have debt<\/h4>\n
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