By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
Why you don't need to panic about Mondays stock market crash
More than half of American families invest in stocks. Should those families be worried after Monday's market crash? - photo by Herb Scribner
Investors, Wall Street workers and general American news consumers went into panic mode Monday morning when the stock market tanked, according to BuzzFeed News.

The panic began after the Dow Jones Industrial Average, which is often considered a general indicator of U.S. economic health, dropped more than 1,000 points, according to BuzzFeed News.

This is mostly due to Chinas strong stock market, which has affected the global economy over the last few years, also dropping after investors felt concern for the Asian countrys slowing economy, BuzzFeed News reported.

The crash didnt last long, however. BuzzFeed reported that the stock market rebounded shortly after by nearly 300 points. And, as The Wall Street Journals national economics correspondent Nick Timiraos pointed out on Twitter, Mondays stock market drop isnt that big compared to previous years.

Despite the panic, Mondays crash isnt something that the more than half of American families who invest in stocks need to feel too much concern about, according to Ron Lieber of The New York Times.

Lieber said that stock investments are most useful for long-term goals, so setbacks like Mondays crash are a part of a long-term plan for most investors. The drop shouldnt force investors to think of a new investment strategy or back out of their financial plans immediately, Lieber wrote.

At some time in the past, when you were not scared, you made a decision to construct your portfolio a certain way, Lieber wrote. You knew that stocks involved risk and that the returns they have traditionally delivered, above and beyond what cash and bonds do, was the reward for your persistence. Nothing about the events of recent days suggests that the fundamentals of capitalism have changed. So neither should your confidence in very long-term ownership of the pieces of the for-profit enterprises that benefit from your fortitude.

Liebers advice isnt that far off from Matt Yglesias' of Vox. A stock market crash may make people feel inclined to sell their stocks and head for high water, Yglesias wrote. But, he pointed out, investors should remember that stocks are a long-term game, which includes some instability and risk year over year.

In fact, if you are quick to sell your stock during a crash, it could hurt your finances more than help, according to Yglesias.

In the long run, the stock market has a pronounced tendency to go up, but it exhibits a lot of day-to-day and even year-to-year instability, Yglesias wrote. The key to making money as an ordinary investor is to ride out those highs and lows and take advantage of the beneficial long-term trend. Yet studies show that most people fail to do this, with potentially catastrophic accounts.

And, as Lieber noted for The Times, long-term investors have time to recover. The stock market can rebound and give investors more opportunities to make their money back after a dip or crash.

But if Mondays crash has instilled worry, there are some tips you can follow. Lieber suggests investors seek other ways to save their money like investing in lower return stocks so that their risks arent as high in the future. This is especially important for investors who stress out about the stock market.

Some people cannot handle the stress of investing in stocks, Lieber wrote. But try to give this more time, and consider the alternatives. There are few investments that can deliver the kinds of returns that stocks can without their own accompanying anxiety.

Otherwise, Lieber suggests investors ride out the current storm. Soon, the stock market will rise again and lessen the stress.

Most of us have to save somewhere, and history suggests that stocks are the most accessible route to get the returns youll need to retire someday, Lieber wrote. It would take decades of systemic economic erosion to prove otherwise, and a few days of market declines do not suggest that anything like that is upon us.