Reconsider Before Selling Your Stocks

NEW YORK — Amidst the tumultuous events globally, the fluctuating movements in Wall Street might seem unusual. However, for investors, such volatility is quite normal. Drastic fluctuations in the U.S. stock market, like the recent 6% drop over a couple of weeks, occur frequently. Managing these swings is the cost investors bear for the potentially higher long-term returns that stocks offer compared to other investments.

According to experts, the current situation is not significantly different. Here’s a look at the driving forces behind the market’s volatility and the advice experts are extending to investors both young and seasoned:

IS THE MARKET TROUBLED?
Yes, the market is certainly facing challenges. The primary indicator of the stock market, the S&P 500, has been on a declining trend since hitting an all-time high recently. This drop is mainly driven by concerns over President Donald Trump’s tariffs and signs that the U.S. economy is not performing as robustly as anticipated by economists.

Uncertainty in economic conditions often causes hesitation on Wall Street. Trump’s tariffs have particularly unsettled the market due to their unpredictable duration. Elevated worries lead to sharp declines in stocks. However, when Wall Street perceives the tariffs as mere negotiation tactics, stocks tend to rebound, as seen on recent trading days.

DO STOCKS SHIFT LIKE THIS FREQUENTLY?
They certainly do. The S&P 500 regularly experiences declines greater than the recent one, typically of 10% or more, about once a year. Experts often regard these declines as necessary adjustments, reducing overoptimism that can cause stock prices to surge too high.

Even before this recent downturn, some critics claimed that the U.S. stock market was overpriced, as stock prices were growing more rapidly than corporate earnings. Additionally, a small group of companies has been responsible for a significant portion of the market’s returns. According to data, only seven major tech companies contributed to over half of the S&P 500’s total return last year.

SHOULD I CONSIDER SELLING?
It can be distressing for investors to see their portfolios lose value. This recent volatility is particularly unsettling given the period of calm markets experienced previously. The S&P 500 had enjoyed consecutive years of over 20% growth, a streak last seen in the late 1990s.

Selling stocks might provide some immediate reassurance, but it also solidifies losses and eliminates the opportunity to regain value over time. Historically, the S&P 500 has rebounded from all its downturns, restoring investors’ wealth, including after events like the Great Depression and the recent COVID-19 crash.

While some recoveries are slower, experts generally advise against investing money in stocks that you can’t risk losing over several years, ideally up to a decade. “Historically, data shows timing the market is impossible,” comments Odysseas Papadimitriou, CEO of WalletHub. In other words, as Chris Fasciano from Commonwealth Financial Network recommends, “Stay the course.”

SHOULD I ADJUST MY INVESTMENTS?
Despite the downturn in the U.S. stock market, certain areas outside the major tech firms have performed better, notes Fasciano. Stocks outside the U.S. have also shown resilience.

It serves as a reminder that investors benefit from diversifying their portfolio instead of concentrating on a few sectors. Many may find their portfolios were less diversified than presumed, given the dominance of a few key players in the U.S. stock market and Wall Street’s global influence.

“It’s a good time to revisit conventional portfolio strategies like diversification,” Fasciano suggests.

I’M A NEW INVESTOR. WHAT’S NEXT?
The arrival of online trading platforms and the convenience of trading via smartphones have introduced many new investors unfamiliar with such market volatility.

Fortunately, younger investors generally have the advantage of time on their side. With many years to go before retirement, they can endure market fluctuations in hopes of a market rebound and eventual portfolio growth.

“Younger investors should remain unconcerned,” reassures Phil Battin, CEO of Ambassador Wealth Management. “It’s merely background noise. If you have decades until you need the funds, the economy has weathered numerous crises, and it will withstand the Trump tariffs as well.”

WHAT ABOUT CRYPTOCURRENCIES?
This area is more complex. Cryptocurrency is often touted as a detached investment from the stock market, meant to hedge against traditional economic factors, observes Sam Taube from NerdWallet.

However, in reality, cryptocurrencies have frequently mirrored stock movements, losing value when stock prices drop, rather than providing safety during market sell-offs. “It’s time for young investors to reassess the assumption that crypto’s value is wholly independent from the stock market,” Taube advises.

HOW SHOULD RETIREMENT-BOUND INVESTORS PROCEED?
Older investors have less time for their investments to recover. Nonetheless, even retirees may need their investment portfolios to last for three decades or more, suggests Niladri “Neel” Mukherjee of TIAA Wealth Management.

In retirement, individuals might consider reducing their spending and withdrawals following steep market declines to preserve potential future growth. However, retirees should still maintain some stock investments, especially in the early stages of retirement, in preparation for extended financial needs.

“Consider easing back and then resuming once the market recovers,” Mukherjee advises, “but it ultimately depends on discussions with your financial adviser.”

HOW LONG WILL THIS LAST?
No one can predict the future, and anyone claiming otherwise isn’t being truthful.