Fear is spreading among investors after a day that saw the Dow Jones drop as much as 1,500 points dramatically below 25,000.
The massive selloff led to the worst single-day point loss in the Dow鈥檚 history, the biggest fall since 2008, a year that raises uneasy memories of the global financial crisis. Undoubtedly, the day will have some wondering about their personal finances and what to do with their investment portfolios.
But some commentators advise that investors not be skittish. , a personal finance expert, told 麻豆传媒 Channel that this is just business as usual.
鈥淭his happens from time to time and it鈥檚 not something that people should be freaking out about,鈥� he said Monday. 鈥淚f you鈥檙e thinking about your own investment portfolio, probably the best thing to do is not touch it. Don鈥檛 do anything and stick to your plan.鈥�
When considered on a percentage rather than point basis, the day鈥檚 events aren鈥檛 quite as dramatic. The declines today aren鈥檛 even among the top 300 biggest percentage drops in the Dow鈥檚 history, dipping just 4.6 per cent. The biggest percentage drops in history are as steep as more than 20 per cent. While the numbers are unsettling from a day-to-day standpoint, says Banerjee, it doesn鈥檛 mean the outlook is bleak.
鈥淧art of the reason that we鈥檙e seeing this today is because the market is actually doing really well for the last couple of years and to a certain extent there are a lot of people who have been looking for any excuse to sell,鈥� said Banerjee. 鈥淭here are all these danger factors that people have on the top of their mind, but they鈥檝e been waiting for an excuse. For some people the selling activity is just them playing on these fears.鈥�
On Friday, the Dow dipped 666 points and some were hoping Monday might be calmer after a weekend period of reflection. Not so. 鈥淚t鈥檚 a very volatile day on the market,鈥� said Marvin Ryder, associate professor at McMaster University School of Business.
Ryder says pessimistic investors are a growing influence as the market becomes less bullish.
鈥淏ears see the world as the glass half empty, bulls see the world as the glass half full. For the better part of a year and a half, the American stock market has been rising quickly and dramatically and the bears have been growling more and more and more that a correction is just inevitable, it鈥檚 going to come crashing down and they keep looking for evidence,鈥� he said.
Despite the volatility, Banerjee says most personal investment portfolios won鈥檛 be impacted much by the Dow鈥檚 drop since its common for people have balanced portfolios featuring both stocks and bonds, which means, for example, the market could be down 4 per cent, but their portfolio might only drop 1.5 or 2 per cent that day.
鈥淒on鈥檛 worry too much about this, because this again does happen from time to time,鈥� said Banerjee. 鈥淭he worst thing you can do is sell in reaction to being fearful.鈥�
