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When the stock market stumbled earlier this week, you may have been spooked, and understandably so. Experts have long been warning that a market correction is coming. Plus, with September historically being the worst month for the stock market and all the anxiety around an awaited correction, he says it seems too expected right now.
A more likely driver, he adds, will be when the Federal Reserve tightens monetary policy and makes it harder to borrow money. Federal Reserve chairman Jerome Powell said on Wednesday that the central bank may soon begin to ease up on the stimulus that has helped keep the economy afloat during the pandemic. If we have a correction when case counts are rising, then traditional defensive investments like utilities will work well, since investors tend to move towards defensive sectors and bonds during uncertain times, Paulsen says.
That's because falling cases will cause investors to expect the economy will reopen, and when that's the case investors favor economically-sensitive sectors like hospitality, not defensive investments. Investments that aren't traditionally defensive, like cyclical stocks, small-cap and international stocks, could benefit from COVID cases coming down, Paulsen says. Newsletter Daily Money Every day we publish the latest news, stories, and content on the financial topics that matter.
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Follow AMCScam. Key Points Crashes and corrections are far more common than you probably realize. Patience is the most powerful tool investors have. But with the right plan to move forward, we can and will continue to make progress. Here are five ways you can respond to a stock market crash:.
Dealing with the unknown creates uncertainty, and uncertainty left unchecked can become fear. Choose to stay clear and positive with your thoughts.
Meal plan to save money. Use up the food that you have in your pantry and freezer before you go out and buy more. Focus on funding the Four Walls before anything else:. You can pause paying extra toward debt right now.
When the tough time passes—and it will—then you can start back up and pay extra on your debt. Stay on the plan! Stay plugged in and ride it out to give your investments more time to grow and recover. Focus on time in the market. When there are big shifts in the market, schedule a call with your investment professional. Ask your pro if you need to make any changes because of the crash. Connect with an investment professional in your area.
No matter what the rest of has in store, remind yourself of the things you know to be true. You care about your family, your dreams and your future—so make your investment decisions with those things in mind. Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since Millions of people have used our financial advice through 22 books including 12 national bestsellers published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.
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