The Big Drop of 2011

Today, the major stock markets saw the largest drop of the year. The DOW dropped over 500 points. All stock market gains for 2011 have been erased. I hope it will remain the largest, also. But should you panic. Please no.

I realize it is difficult to hang in there when things are looking bleak, but research shows that panic reactions cause great loss to portfolios. In most cases you will be better off waiting it out.

There are some factors to consider before making drastic changes to your portfolio. One question to ask, “How long before I retire?” If you still have twenty or more years, I think I would ride the current downturn out. Another question, “My stock(s) lost 50% today, do I sell?” I would first determine what the price was when you first purchased it. If you bought a stock when it was selling for 19 and it is still trading at a profit, hang on to it. It is probably going to come back. But, do some research. Is the company having some serious problems or was it just caught up in today’s selling.

The stock market is still much higher than the lows of 2008. The danger with just selling now and getting out is your portfolio could take a huge loss. People have a bad habit of buying high and selling low. Market timing is next to possible and trying to guess its downturns and upturns usually costs us money.

That being said, during this turbulence, you might want to look for some top cd rates to at least protect a portion of your assets from loss. I know many people keep saying, buy gold, buy gold. But, I think for most people, it would be a losing investment at this point. One thing I have learned, when everyone is saying to do a particular investment, it probably isn’t the right choice.

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