So the Dow plunged 513 points Thursday, marking the worst day for the Dow since 2008.
What it means for you depends on where you're invested, said Donald Ackley, Certified Financial Planner with
"If you have a traditional pension plan, (Thursday) was a nonevent. If you have a 401(k), it could have been a very traumatic event," Ackley said.
Thursday's plunge in the
As for people with 401(k)s, how damaging Thursday's decline is depends on how their 401(k) is allocated, whether it favors risk.
"Unfortunately, in most cases, the plan sponsors give no advice at all," Ackley said. "So many people with 401(k)s are left to fend for themselves."
People have to determine for themselves how much risk they can stomach, emotionally and financially, and that varies based on age and income security.
"Some people who have a very high risk tolerance, actually have a very low risk capacity, and vice versa," he said.
For many of Ackley's clients, who have been working with him for 15 or 20 years, Thursday's tumble is something they've been through before.
He's been working with clients for the past year and a half to reduce risk. "I think the time to be aggressive was late 2007, early 2008. But as the market recovered over the last couple of years, that's when you want to start getting more conservative. My clients and I have been talking about this possibility for some time."
No one could've predicted a 500-point-in-a-day decline, Ackley said. But it's been clear that things weren't on solid footing. The unemployment rate is still high, and many workers are underemployed. Government, banks and individuals are holding tremendous amounts of debt. The real estate market isn't showing signs of improvement, and there's been "deadlock" in government, he said.
"That's hardly an encouraging environment," Ackley said.
"Most of my clients, I've suggested they decrease their exposure to stocks relative to bonds and cash."
He can't advise readers whether they should take a risk or be conservative now because those decisions must be made case by case.
"One could make a case that when the market drops 500 points, that could be an opportunity. Each person should judge that based on their circumstances as well as their emotional state."
One thing that has been doing well is gold. But Ackley doesn't recommend speculating in it.
"If you look at the long-term history of gold, it's obvious that the only way to make money on that is to buy it at the right time, and sell it at the right time, and trying to determine when those times are is a risky business."
Stock markets have their ups and downs, and predicting it from day to day is impossible.
"The tried and true advice is either you're a long term investor or you're a speculator," Yochum said. A long-term investor trusts in the future growth of the country's stock market.
Two years ago, people bailed out of the stock market when it plunged, undoing their chances of recouping their losses, Yochum said.
"People need to establish if you're in for the long term or if you're in for the short term. If you're in for the short term, you're speculating."