A market ‘ correction’ may be good for you
Plunging prices can be worrisome but pros say it’s a normal part of a cycle
“If this isn’t a wake- up call for complacent investors, I’m not sure what is, but that doesn’t mean folks should run for the hills.”
Mike Loewengart, E- Trade
It’s time to pop a Maalox. Blame the plunging Dow. The blue- chip stock average is trying to make a habit of daily 1,000- point dives. This past week it briefly fell more than 10% from its January all- time high, a swift sell- off that has investors on edge.
Wall Street pros say that such a drop, dubbed a “correction,” is normal. They say that they are healthy and that they flush the froth and irrational exuberance out of overheated markets. All true. But that doesn’t mean these downturns aren’t events that cause investors to wonder if their money is safe.
“Investors are feeling increasingly nervous,” says Terry Sandven, chief equity strategist at U. S. Bank Wealth Management in Minneapolis.
But an emotional investor isn’t an effective one. Panic isn’t a financial strategy. Corrections don’t mean the Dow is going to zero. In fact, periodic drops of 10% aren’t all bad for investors, especially those with long- term financial goals, investment pros say.
“If this isn’t awake- up call for complacent investors, I’m not sure what is, but that doesn’t mean folks should run for the hills,” says Mike Loewengart, vice president of investment strategy at online broker E- Trade.
Here’s what 401( k) investors need to knowabout corrections.