Investors and analysts are in a tizzy because of the recent drop in the stock market. No one can point to any single event that has caused this sudden sell off. Some investors plan to buy in the dip, others are panicking thinking that this is going to turn into something terrible. A bunch of articles are popping up and giving contradicting advice on what to do when the market crashes.
Instead of jumping on the drama train, I’ll just say that you have nothing to worry about. I have looked at some of the large companies in the DOW Index, and many of them are over valuated. Every once in a while, the stock market “corrects itself” because the value of large companies are inflated. This is another one of those corrections. The Federal Reserve has kept interest rates artificially low since the recession, and they have been gradually raising it back up because the economy has been doing so well. This has allowed for borrowing at low interest rates, and it has also caused the value of bonds to go up to artificial levels. The bond market is due for a larger correction than the equity market is.
No one could point to a particular event that caused the stock market to drop, but I actually have one event in mind. When I woke up last Monday, I was thinking about my investment portfolio. I thought, “It’s about time for a maket correction.” A few days later, an article came out stating that Goldman Sachs thought it was about time for a correction. I shared the article on my public Facebook page, and a commenter who is an admin of the Facebook page, Deflating Atheism rightfully stated, “Goldman Sachs saying anything about the stock market seems like a self-fulfilling prophecy.” He hit the nail on the head. That is what I think happened. Goldman Sachs has a lot of power, and investors take what they say very seriously. It is likely that people stated selling off as the news circulated because in the investing world, when Goldman Sachs says something, it’s a big deal.
What Should You Do?
Keep investing and hold your positions. Don’t try to time the market. A lot of people say, “I’m going to buy so I can get stocks at a low price!” The price of stocks actually isn’t very low right now at all, they are still quite high in comparison to even a year ago. Keep putting your money into your investments on a regular basis. Studies show that those who invest regularly normally do better than those who try to time the market (And who would try to time the market anyway? It’s unpredictable.) The sky isn’t falling. You will be fine! Don’t listen to all of these articles that are now telling you what stocks to buy because the market is dropping. It really isn’t that bad.