Expert says stock market drop shouldn't worry average investors

Analyst says don't panic and sell stocks

ROANOKE, Va. - The stock market got a rocky start Monday morning as stocks tumbled over worries about China's economy and instability in Middle East combined to scare investors.

Although the pain was most felt in China, average investors in the U.S. will also see a decline in their stock portfolios.  However, Roanoke investment advisor Brian Bowen of Integrity Financial Planning, Inc. says the decline may not be as big as the markets are indicating, especially if you only have a portion of your investments in stocks. Bowen says this drop is a short term problem, so if you are a long term investor you shouldn't be too worried.

In 2016, experts say there maybe a moderate increase in U.S stocks, but since there has been a steady increase in the market since the slump in 2008 the chances are small.  Bowen says in order to minimize your concerns about the market, make sure you have a combination of investments.
 
"It's all about 'What is this money being used for? Am I using this to buy a car, a house, or business, or a gift to the grandkids?' Well it probably shouldn't be in individual stocks; they can fluctuate over 20 percent in a day," Bowen said. "So's there is certain money for certain things. If you're talking about retirement for someone that is younger - in their 30s and 40s - they're probably aren't too concerned about this. Now the pre-retiree that's retiring next year is very concerned about this.  If they have all of their assets in a individual stock portfolio they are probably taking too much risk."

Many people get scared when the market goes down and pull their money out of stocks, but if you have plenty of time before you need the money, the investments will likely come back in the long haul.

"What most people do is they panic," Bowen said. "[In] study after study that we've read, the average investor return is less then the stock market return. The average S&P 500, which is three quarters of the stock market, earned about nine percent. Pretty good, right? You and I would like nine percent, but the average investor actually earned only five percent that was in stocks or stock mutual funds. You think, 'Well, why did they only earn five percent?' Because they sold at the bottom."

Bowen says this is not the time to get emotional and overreact. It's a time to look at your overall portfolio and evaluate what's needed at this particular time in your life.


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