The steep decline in the stock market does reflect the alarming state of the global economy that is headed towards a recession sooner or later. This is also an extremely difficult situation for those people who are on the verge of retirement and have invested substantially in the stock market.
On the flip side, if you are someone who is years away from retirement, there is nothing that should scare you from investing more money in this declining market. Low prices at this moment generally mean that it is a better time to invest for those planning to remain in stocks for the long-term. Being a typical investor, the decision to sell at this point is the worst for your portfolio. It is advised that you keep a close track of your household budget and check if you can increase the amount of investment in 401 (K) or IRA for better returns when you retire.
The stock market will go up in some time
There can be volatility in the market but generally, the stock market is something that keeps growing art regular intervals. With the growth of the economy, the corporate profits also take a hike and this is the reason why the US Stock market has probably never gone down in the last 20 years. Unless there’s an apocalypse or a nuclear war that wipes off the cities of the US, there is nothing that can stop your money from growing in the long-run. The short-term ups and downs in the market are a great indicator of people’s sentiment for the coming days.
In October 2008, the DOW index fell flat by 18% and it kicked off the period of recession. Despite the Great Recession causing significant horror in the market, the economy never slipped by 18% actually. Post this, when Barack Obama enjoyed his first term in the US, the stock market showed a great jump. This is mostly due to the fact that there’s no reason why the stock market would remain slump even if the economy had faced a crunch.
While Coronavirus does seem to be a serious contender to derail the global economy, there’s no reason why the market will remain low for the next 10 years! It is a matter of time that the market will eventually bounce back and yield positive returns for the investors. It is noteworthy to say that the rate of return has taken a major boost for the next 20 years just because of the slump in the market right now. Though the scenes look dull at this moment, but over a multi-decade horizon, it is sure that your stocks will grow substantially.
Also, the decline in the market has brought along with it a rate cut. If you have plans of taking loans or mortgages, this is a good time as the rate cut is in play at the moment.