What should investors do during stock market selloffs?

Stocks plummeted on Monday. Concerns about the U.S. economy With major stock indexes in their worst performance in two years and a possible recession, some investors are concerned about how to protect their portfolios and the market from a downturn.

The Dow Jones Industrial Average fell 1,033.99 points, or 2.6%, while the Nasdaq Composite and S&P 500 fell 3.43% and 3%, respectively. The Dow and S&P both finished with their worst day since September 2022.

Amid the market turmoil, financial experts urged investors to understand that volatility is a normal part of financial markets and they should think carefully before investing. Selling investments during a downturn.

“Volatility is inevitable. We don’t know when it will happen, but we know it will happen,” Fran Kiniry, principal and head of Vanguard’s Center for Investment Advisory Research, told Fox Business. “It’s very hard, but historically it’s best not to sell in times of panic.”

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Kiniry said declines like the one the U.S. stock market experienced on Monday happen regularly and that the current Market setbacks It’s not out of the norm.

“For U.S.-focused investors, it’s worth noting that the world’s largest stock market is not out of ‘business as usual,'” Kinaly explained. “Based on the lowest ticks in S&P 500 futures to date, [Monday] By morning, U.S. benchmark stocks will be down just 7.4% from their July 16 highs. Historically, declines of this magnitude have been quite common, with the median largest annual decline since 1985 being 10%.”

“The key to weathering market fluctuations is having a long-term investment plan in place and staying aligned,” Rita Assaf, vice president of retirement products at Fidelity Investments, told FOX Business. “While it’s impossible to predict market direction, it’s important to remember that downturns are normal. Market downturns can be unsettling, but history has shown that stocks have recovered and delivered long-term gains.”

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Vanguard’s Kiniry and Fidelity’s Assaf said investors shouldn’t try to time the market and generally avoid selling investments during economic downturns. (Photo by Michael M. Santiago/Getty Images/Getty Images)

Assaf said Fidelity stresses that investors should “focus on their time in the market, not trying to time the market.”

“It may be tempting to sell stocks to avoid a downturn, but timing is difficult,” Assaf explained. “If you sell and remain on the sidelines during a recovery, it will be hard to catch up. Even missing a few of the market’s strongest days can significantly hurt performance. In fact, Investing in a recession Historically, it has delivered strong investment results.”

“For some, a downturn is an opportunity to buy for their objectives. We encourage people to regularly review their investment objectives and build a diversified portfolio (e.g. one that is not too concentrated in individual stocks and can withstand all market environments) designed to suit their needs and objectives,” she added.

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Fidelity’s Rita Assaf and Vanguard’s Fran Kiniry both said investors should focus on how long they’re in the market, rather than trying to time it. (Michael M. Santiago/Getty Images/Getty Images)

Assaf noted that financial advisers may be able to help investors take advantage of market declines, such as by taking losses on some investments to reduce future losses. Tax invoice – Or you can take advantage of the decline in stock prices and convert to a Roth IRA in a lower tax bracket.

Kiniry noted that investors have seen solid returns over the past year despite the recent sell-off that began last week. “Unless investors have made a lump sum investment and put the majority of their money into the market for the first time in the last few weeks, now is a great time to get invested,” he said.

He pointed to some funds’ year-to-date returns as of market close on Friday: Overall US stock market That’s up 12% in 2024 and 19% over the past year.

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“Investors and advisors should be patient, stick to a long-term financial plan and try to filter out as much market noise as possible,” Kiniry says. “Consider the benefits of a broadly diversified portfolio that includes exposure to global equities that can protect you from domestic market and economic shocks. And, importantly, know that being in the market for the long term is better than timing the market.”

FOX Business’ Matthew Kazin contributed to this report.