Why You’re Crazy To Panic When The Stock Market Drops

  
The stock market has gone wobbly again with more dire headlines about quarterly losses and worries over  the state of the global economy. 

But how much has really changed in the past few months?  Not much. Our knowledge of the world is pretty much the same.

The U.S. economy is still in better shape than most of the rest of the world.  Commodity prices are still low (a plus for consumers), and there are still plenty of good companies to invest in.

“The media is out there hyping the activity in the market,” says equities expert Susan Schmidt of Westwood Holdings in Dallas.  “They’re focusing on what’s happening during the day, but investing is really about focusing on the long term.”

I’m a journalist and I have an ego. I know that she’s right.  It’s fun when your story is the lead item on the network news. 

Newspapers, radio and TV cover what changes from one day to the next, but Susan says that should be of little concern to the 55% of Americans who have money in the stock market.  Think decades not days should be their mantra.  Over decades your retirement savings nearly always do better in stock funds than in cash or bonds.  Especially in this very low interest rate environment.

  
Susan Schmidt.

 “It’s a lot about keeping your cool and looking for the long term and keeping keeping your eye on the bigger picture… Be the cool customer and don’t panic,” Susan told us on the latest How Do We Fix It? podcast. 

“No investor is right 100% of the time and if they say they are! they’re lying.” Listen to what she said here.

If you’re scared that Wall Street is nothing more than a giant casino, here are some fixes.

–  Look at the stock market’s performance over the long term. Ignore the noise of daily news coverage.

–  Diversity your investments and spread risk. Consider low-fee large and small stock funds as well as US and international investment products.

–  Learn the language. Investing basics are easier to grasp than you may think.  Big investment firms can help you take the first steps. Find out what you need to know at at fidelity.com, TDAmeritrade or Vanguard. 

–  “Morningstar is the equivalent of Rotten Tomatoes,” Susan tells us. “Morningstar gives stars to mutual funds.” From one to five stars – “the more stars the better.”. 

Top photo from the front page of the Financial Times. September 30, 2015