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Financial expert: 3 things to know about Monday's market dip

POSTED February 7, 2018 4:49 a.m.
If you pay attention to the stock market religiously or even infrequently, Monday’s stock market dip likely still grabbed your attention.

The Dow Jones Industrial average dropped a record 1,175 points, and that can feel uneasy for those who have placed their 401(k) retirement savings in the stock market or have invested any stocks at all.

Shane Stewart, a certified financial advisor for Deseret Mutual Benefit Administrators, discussed what Monday’s market drop meant and what people should do if something like that happens.

Points are not percentages

The Dow Jones Industrial average dropped a record 1,175 points Monday, but that doesn’t mean as much as percentage. In fact, to put Monday’s drop into perspective, it was nowhere near as bad as “Black Monday,” Oct. 17, 1987, when the Dow plummeted 508 points.

It is because 508 points was a 22.6 percent drop in the average in 1987, while Monday’s drop was 4.6 percent drop. In fact, Monday’s drop wasn’t even in the top 10 worst drops in Dow history. That said, it still is an eye-opener, Stewart said.

“Nowadays, because the market is so high, it is not quite as big of a drop percentage-wise, but it’s just a shock to the system to hear that,” Stewart said, regarding the news of hearing about the market drop. “We’ve had, speaking of percentages, an incredible run up for quite some time.”

This was expected

You always hear that the market fluctuates. So with the remarkable rise of the stock market to a record 26,000 points last month, market analysts were expecting that a drop had to come eventually.

So sure, the Dow dropped below 25,000 on Monday, but it also remains 3,000 points ahead of where it was at in February 2017, according to CNN Money.

“We enjoyed some ups, and we kind of expected this correction at some point,” Stewart said.

To the fluctuating point, the Dow closed at 24,346 points on Monday and moved above and below that line about 10 times Tuesday morning.

Resist the urge to react quickly

Stewart likened a bad day in the stock market to an injury and said it’s human nature to do something if you’re feeling pain. However, when it comes to the market, he urged it’s typically better to do nothing than to do something.

For those who receive 401(k) notices quarterly, they wouldn’t see what a one-day drop would do to their portfolio as compared to someone who checks their 401(k) daily. The same goes for stocks.

“I think what we have to do is resist the urge to see what ‘the damage is’ and ride this out,” he said.

So how does one do that? Well, just stay away from the market. The financial experts, Stewart points out, have diversified portfolios and will ride out any major market event.

“The worst thing we can do is be reactionary to this news too much because we could hurt ourselves,” Stewart added. “Most people who move money around try to move money around quickly, end up hurting themselves, rather than the people who stay put.”

Brian Martin and Amanda Dixon contributed to this story.

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