Should You Worry About Market Volatility?
This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing why investors would be wise to tune out the noise of market volatility:
On August 5th, 2024, the S&P 500 Index dropped 3% from its previous close, the largest single-day loss in almost two years. This continued a three-week slide that saw the benchmark index — generally considered representative of the U.S. stock market — decline by 8.5%. The tech-heavy NASDAQ Composite Index dropped even further, losing 3.4% on August 5th and more than 13% over a four-week period.
The final losses for the day were not as bad as they might have been. In the early morning, the CBOE Volatility Index — often called the fear gauge — reached the third-highest level in its history, eclipsed only by the 2008 global financial crisis and the 2020 pandemic crash. By the end of the day, however, it had settled to a more normal level for a down day. And the market rebounded quickly. Two weeks later, the S&P 500 was just 1% off its all-time high, while the NASDAQ was about 4% down from its peak and riding an eight-day winning streak.
Tuning Out the Noise
If you were paying close attention to the market on August 5th, it would have been natural to be concerned. But as the subsequent bounceback illustrates, it would have been unwise to panic and change your investment strategy in response to the temporary volatility. Selling when the market declines is the surest way to lock in losses, and you may miss out when the market rebounds.
Most individual investors are best served by building a diversified portfolio appropriate for their goals, time frame, and risk tolerance, and letting the portfolio…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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