As Stock Market Plunges For Coronavirus Panic, Advisers Say: Stay The Course

The stock market has been plummeting in recent days — on Thursday the Dow Jones Industrial Average lost nearly 1,200 points. Financial advisers are advising clients to not panic and stay the course.

MARY LOUISE KELLY, HOST:

Four-point-four percent - that is how much the Dow fell today. Stocks are continuing to plummet over fears about the spread of the coronavirus. All the major indexes have now declined more than 10% from their recent peaks earlier this month. NPR's Chris Arnold covers investing and personal finance. He joins me now.

Hey, Chris.

CHRIS ARNOLD, BYLINE: Hey, Mary Louise.

KELLY: Four-point-four percent sounds bad.

ARNOLD: Yeah.

KELLY: How bad was it today?

ARNOLD: You don't have to be an economist or a trader to know that. Yeah, it was pretty bad. It was another big sell-off in stocks and no sign that it's over. There was also this ominous report out from Goldman Sachs that said, given the likelihood that the coronavirus is going to become more widespread, they're estimating overall zero earnings growth for U.S. companies this year. And so far this week, I mean, we have seen more than a 3,000-point drop in the Dow - today alone, 1,190 points down. None of this can be very encouraging to investors.

KELLY: No, it all sounds really bad. Are people panicking?

ARNOLD: You know, overall, none of this is good, but I don't think this is a full-on widespread panic. I was talking to financial advisers today, and so far, they're saying it's nothing like it was in the depths of the financial crisis...

KELLY: OK.

ARNOLD: ...When, you know, their phones were ringing so much they couldn't - as soon as they put the receiver down, you know, it was ringing again. They are getting some calls, though, from worried clients. I talked to Patrick Collins at Greenspring Advisors in Towson, Md.

PATRICK COLLINS: One of the ones that I got was - it was a client who - they said, you know, I got a call from a family member who's kind of in the business a little bit and said, you should sell all of your stocks. That was something that they hadn't heard before, so it definitely got them panicked, and they called, asking, what should we do?

ARNOLD: And Collins told them do not sell all your stocks. At times like this, there can be crazy advice flying around. What he tries to do, he says, is to calm people down. And if you're young, he says, you probably have a very long time horizon on your retirement account; markets always tend to recover, so, you know, just hang in there. You're buying stuff cheap. If you're near retirement, you shouldn't have too much of your portfolio in stock. So either way, you should be able to ride this out.

And I kind of think about this like a roller coaster, right? I mean, the roller coaster, as the stock market's going roaring down, it's really scary, but the only way you get hurt is if you throw yourself off the roller coaster and sell stocks. Just hang in there. It's - always come back up, and ride it back up.

KELLY: OK, so the advice is don't throw yourself off the roller coaster. Don't panic. Don't sell when everything has already fallen a lot. The basic advice, it sounds like, is do nothing, but that is hard. Are there any good things that people can do when markets are tanking?

ARNOLD: People like to do things at times like this. And yes, there is. And this might sound risky and counterintuitive, but if you want to do something, buying stocks is actually not crazy. But you can't just buy them willy-nilly. So all right, imagine your retirement portfolio is a pie or a pie chart, and one slice is maybe 25% - is the U.S. stock market held in a low-cost index fund or something, and then the other slice is bonds, and real estate is a slice. And your job as an investor is to keep the slices the size that you originally targeted. And so usually, if stocks go down, that slice gets smaller; bonds are going to rise in value. You sell some bonds; you buy some stocks. The key is you want to keep it in balance, and this is called rebalancing.

We talked to Trent Porter, who runs Priority Financial Partners in Durango, Colo.

TRENT PORTER: So when U.S. stocks go down, you're selling a little bit of one piece of the pie and buying other pieces of the pie. And so it's systematically buying low and selling high.

ARNOLD: And the key there, again - you're not just blindly buying stocks. You're sticking with your plan.

KELLY: But, Chris, you mentioned people near retirement. What about people near retirement who have loaded up on stocks because they need to try to catch up and make some more money before they stop working? Anything they can do?

ARNOLD: That is a very tough situation. And we're talking about people who took on too much risk too close to retirement...

KELLY: Yeah.

ARNOLD: ...Or in retirement to try to catch up, like you said. You know, there, you're sort of choosing the best among bad options. And each case is a little different, so it's probably a good time to find a good financial adviser. The one piece of advice there that's good is it should be a fee-only adviser...

KELLY: OK.

ARNOLD: ...Because they don't get kickbacks from different funds to stick you into pricey stuff.

KELLY: All righty, NPR's Chris Arnold covers personal finance.

Thank you, Chris.

ARNOLD: You're welcome.

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