With the outbreak of the 2019 novel coronavirus, the stock market quickly took a dive, dipping lower and lower with each worsening report of the viral contagion. For those new to investing in the stock market, this may seem like a sure-fire sign to liquidate and put a temporary stop to all investing, but in reality, you shouldn’t be so hasty.

According to Doug Bellfy, one of Synergy Financial Planning’s certified financial planners located in South Glastonbury, Connecticut, “…a bear market right now is just noise and should be ignored – in fact, often celebrated,” – if you’re just getting started with your investments, that is. But if you’ve just retired, and your entire life’s savings are at stake, risking investment at such a time could “…cause a permanent lifestyle impact”.

The stock market’s Dow plunged more than 450 points on Monday, its most notable loss since October 2019. The S&P 500 suffered a loss of 1.6%. That’s only one side of the story, however, as the S&P 500 has grown a total of 190% since 2010.  

Changes in market trends have different impacts on a wide range of people, and for the uninitiated, incorrectly determining the best course of action through these times of unease could have serious implications on their savings and investments. Keep reading for a quick comprehensive guide that might give you some much needed insight into what these changes mean for your investing.

Getting started in the work force

When you’re young and just getting started in the work force, the turmoil and volatility of the stock market shouldn’t be of much harm to your portfolio as a whole. This is because you shouldn’t be prioritizing high returns on investment in the market anyway, as a higher savings rate will be much more impactful in the long term. James Sweeney, CFP and founder of Switchpoint Financial Planning in Lehi, Utah, says “If you’re 30 with $20,000 invested, whether you earn a 10% or a 5% return will only result in a difference of around $1,000…[but] I can save aggressively, and put an extra $5,000 toward retirement…”

Rather than putting your cards in the stock market, it might be able to sit still and wait for trends to normalize, so chances of a high return on investment may be better determined. After all, “…you don’t want the money you need for near-term expenses in the stock market, because it has a greater chance of losing value,” Nicholas Scheibner, CPF at Baron Financial Group in Fair Lawn, New Jersey says.

Maintaining the course in your 40s-50s

For those a little bit late getting into trading, however, it’s important to maintain a level head when the market takes a dive. One of the biggest mistakes an investor can make is to panic and sell because you want to minimize your losses. Instead, try to remember that even if you’re in your 40s-50s, you’ve got at least a decade of time for the market to normalize. A trend that all economists and agree upon is that despite even the worst of recessions, markets will always trend upwards again, and will often trend back higher than the previous level it was at before it dropped.

During the housing crisis of 2008, the S&P plummeted 56%, but investment portfolios took only one to three years to recover. That said, each case is dependent on your unique portfolio. For example, if you have enough cash reserves to support your short-term needs such as tuition or family vacation costs, then riding out the regrowth of the stock market might be in your best interests. Otherwise, you may consider liquidating to meet your current needs.

Reaching retirement

Older investors who are looking to leave the work force should begin looking to reduce risks in their investment style. A good rule of thumb, says Bellfy, is to have “at least two years’ worth of living expenses” on hand – and more, if you’ve got it.

This will allow you greater flexibility when confronted with a bear market situation, allowing you to wait out lower trends on the stock market and not having entirely cash out your investments.

With many years’ worth of expenses to cover, making the right investments at an older age are still key to achieving a leisurely, comfortable retirement. Even investing in your retirement could be beneficial, regardless of pension and/or social security.

At this stage, having a larger fund of cash and bonds may be the better choice, as you will need to have funds to support yourself until the market begins to trend upwards again. A reserve of approximately five to 10 years’ worth of living expenses will let you comfortably ride out any market downturns. This way, when confronted with unfortunate market circumstances, you can pull from your cash reserves, and give ample time to your investments to regrow.