Stock Market


Within the past week, we have seen major swings in the stock market. The recent volatility has created a sense of fear and anxiety in the American public, especially investors. The Dow had gone down 8.5%, the S&P 500 went down 7.9%, and the Nasdaq went down 7.2%. However, we are due for this because of the small and steady growth the stock market has seen over the past few years. In the last year, the Dow had gone up 20%! In the investing world, that’s a very high number for just one year. But the recent volatility the market has seen over the past few days is nothing to fear. This recent volatility was most likely caused by a large group of sellers in the market, driving the stock prices down. If you are at all familiar with investing, you know that volatility and sellers will affect the market. I mean, what stock do you know that has only gone up? Probably none. The market is always going to be bouncing back and forth and there’s no way to circumvent that. Some smart investors say that the market is overextended right now with stock valuations creating bubbles in the market. Even though the bubble statement isn’t correct, the valuations may have been the culprit of this recent correction. Because of the state of the S&P price-earnings ratios, there’s no way we could possibly be in a bubble because the PE ratios currently stand at 17.5. They were 34 at the time of the dot com crash. All in all, smart investors know that the market goes in cycles. Recessions are inescapable when it comes to the stock market. Just like there are four seasons in mother nature, there are four periods that the market experiences per cycle: Recession, Recovery, Expansion, Contraction. Overall, one of the best times to invest is when the market is very unnerving. Make it a goal to invest regularly rather than try and time the markets like a professional. Investors trying to time the market will most likely fail. A lot of statistical data backs up this fact. When the stocks market declines five percent or more, ramp up the amount of money you are investing at the time. If it continues to decline, keep buying. All of the volatility in the market will average out the prices of the stocks, making your purchase price lower than if you would have invested all at once.




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