The DOW only represents 30 stocks. The S&P 500 index, which holds 500 company stocks is a much better indicator of the overall market.
Last Monday’s point drop of 1175 points represented only a 4.61% loss. Far smaller than the percentage decline on Black Monday, October 19, 1987, when the DOW plunged 22.6%.
If you’re a long term investor, there’s no need to panic. And if you’re not, you shouldn’t be in the stock market anyway.
By the end of the trading day, the Dow had swung all the way back and more — up more than 560 points.
But the speed at which the market has bounced up and down has left many investors spooked, especially those who have been lulled by a nearly nine-year-old bull market.
“Market corrections are normal, no matter how nerve-wracking they are at the time,” says Greg McBride, chief financial analyst for Bankrate.com. He adds that investors should “maintain a long-term perspective and resist the urge for any knee-jerk reactions,” noting that the market is about where it was a mere two months ago.
In fact, financial strategists say there are several reasons for worried investors to do one thing: calm down.