Financial experts are telling jittery investors, including those worried about their retirement savings, not to panic over the recent volatility of the stock market. The Dow Jones industrial average, which had plunged 460 points Wednesday, ended down 173 points (1%) to 16,142 in a highly volatile trading session. This follows the roller coaster ride of triple-digit market swings over the past few weeks.
“The market will have its ups and downs, but it’s important to stay the course,” says John Sweeney, Fidelity Investments’ executive vice president of retirement and investing strategies. “While October gets a bad rap for having the most market declines, it’s important to look at the story the long-term picture tells,” Sweeney says. “If you look at the S&P over a 20-year period, October had the second highest median return of any month — 1.76%.”
If you are five to 10 years from retirement, that’s a long period of time over which your portfolio can grow, so you should be thinking about an equity portfolio that will outpace inflation, he says. “Equities are higher risk but have higher expected returns over the long term and enable investors to earn returns that exceed inflation,” Sweeney says. Your other choices are money markets or bonds. In today’s environment, bonds are not allowing your portfolio to grow at a rate that exceeds inflation, he says.
Sweeney says if you have a sum of money and are worried about investing it all today, take portions of it and invest it over a period of time so you are getting an average rate, buying more shares when they are less expensive and fewer shares when prices rise. You could invest it each month for the next six months or invest one-quarter of it every month for four months, he says.