Stock markets are turbulent, again. Here’s what experts say you shouldn’t do

WASHINGTON – Just don’t look. Not now. Not while there are wild swings in the stock market.

Following the daily plunges and surges will only make you sick, or second-guess yourself – emotions that will very likely lead to losses.

I know that’s easier to say than do when you’re an investor and news reports relay every move the market makes.

But we’ve been here before, and not too long ago. Remember March 2020, just as the pandemic began hitting the U.S. hard?

On March 13, 2020, the Washington Post’s website carried this headline: “U.S. stock market suffers worst crash since 1987, as Americans wake up to a new normal of life.”

On that day, the Dow Jones industrial average experienced a 10% loss.

It marked the Dow’s worst day since the heart-stopping Black Monday in October 1987, when the Dow lost more than 22% of its value in a single day.

Fast-forward to year-end 2021 – Dec. 31 to be exact – and a headline on the Post’s website read: “2021 goes down as a year of high risk and high reward for markets.”

Here we are just a few weeks into January, and the markets are experiencing quite a bit of volatility.

“I fear investors who are new at this won’t understand what’s going on or what to do, and their inexperience will cause them to let their emotions dictate their actions,” said Ric Edelman, host of “The Truth About Your Future,” a nationally syndicated radio program.

But investors who respond with calm and clarity during such times often reap rewards for their patience.

“I think it’s wise to stay calm and avoid big ‘either-or’ moves, especially moving out of stocks entirely,” said Christine Benz, director of personal finance for Morningstar.

“Selling stocks can provide some short-term peace, but it’s often immediately replaced by a nagging worry of, ‘Is it time to get back in?’ ”

I made the rounds of financial experts I frequently poll when the stock market is having wild swings.

Here’s what they advise for various investors.

You’re not investing

“You’re at risk of missing out on some of the biggest gains as the market recovers,” said Mychal Campos, head of investing for online investment firm Betterment.

As the market dips, this could be a good time to jump into investing.

The ideal way to invest is to buy low and sell high, said Ernest Burley, a certified financial planner and owner of Maryland-based Burley Insurance and Financial Services.

“As the market recovers, you have the potential to earn some gains on the ride up,” Burley said.

“People often buy high and sell low because they invest purely on emotions. This is a surefire losing strategy.”

You’re a young investor with years to go

“Younger people saving for the long-term future need to have an allocation that allows for growth and use opportunities like the current market upheaval to rebalance their accounts,” said Carolyn McClanahan, a certified financial planner who founded the fee-only Life Planning Partners based in Jacksonville, Fla.

Want to weather turbulent times in the markets?

Start with a solid investment plan.

“Having been through so many market upheavals in my career, I feel like my answer is very boring, and it still works,” McClanahan said. “People should always have a goal for their money, and their investments should be allocated based on their goals.”

You’re 15 to 20 years away from retirement

Investors in this category should definitely check their asset allocation and compare it with their target goals, the experts said.

Here’s the problem: A lot of investors don’t have asset-allocation targets.

If they’re managing their own portfolios, they might have overly risky or overly conservative portfolios, Benz said.

If you’re unsure of how to allocate your retirement contributions, a target-date fund might help you avoid panicking when the market is jumpy.

Think of these funds as operating like the “set it and forget it” slow cooker that allows you to simmer a stew with little effort.

The idea is that you don’t have to closely monitor your investment account because the asset allocation and rebalancing are done for you.

The funds automatically rebalance from riskier investments to more conservative ones as you reach a target retirement year.

Just note that even though various funds may have the same target date, the returns can vary.

“I always think a target-date fund is a decent starting point for benchmarking asset allocation,” Benz said.

“It’s not perfect in every situation, but it’s certainly better than nothing.”

You’re five years away

“You’re a short-timer,” Burley says.

Here’s a general rule of thumb on risk tolerance and investing, according to Burley:

The more time you have before touching the money, the more aggressive and growth-oriented you should probably be because you have more time to try to earn some gains.

The less time you have before touching the money, the more conservative you should probably be because you have less time to recover from any losses.

However, some people don’t plan to touch their retirement money right after retirement, so their time horizon may still be 10 years or more, he said.

“Each person is different,” Burley said. “As one of my clients so eloquently stated, ‘I’m retiring, I’m not dying, so I still want my money to grow.’ ”

You’re retired

If you’re living off your retirement account, you should have at least five years of cash needs in safe investments, McClanahan said.

“Now is a wake-up call to do a good financial plan to understand your cash-flow needs and construct an investment policy that takes into account your cash-flow needs going forward,” she said.

“The problem with a market downturn is you don’t know whether it will keep going down or go back up, so you need to plan for the worst.”

When the markets look dire, often the best thing to do is nothing, Campos said.

“People seem to have short memories about market drops,” McClanahan said.

“They always think, ‘This time is different.’ It isn’t.”