TOPEKA, Kan. (KSNT) – The Dow Jones Industrial Average dropped 1,000 points to start the week.
It’s the biggest one-day drop in more than two years. KSNT News spoke to local financial experts about what you can do to protect your investments.
Coronavirus cases are surging outside of China, particularly in Italy, Iran and South Korea, highlighting worries of an economic slowdown across the world.
Markets are changing for two reasons.
“The first reason is just the uncertain nature of it. There’s still a lot about the coronavirus that we don’t know […] ultimately how it will get resolved,” said James Walden, Partner and Chief Investment Officer at Clayton Wealth Partners in downtown Topeka.
The second reason is the impact on the global economy. According to the World Bank, China now accounts for one-third of total world trade.
But Clayton Wealth Partners encourages investors not to panic and to focus on the long-term.
“If you’re young and a net saver, you should actually welcome periodic moments like this,” Walden said. “It allows you to accumulate additional shares in your investments at a lower price.”
If you’re an older investor, Walden says this highlights the importance of diversifying your portfolio. This helps limits the risks of investing solely in stocks.
“For example on Monday, when stocks around the world were selling for 3% plus, high quality fixed income and gold, was actually up for the day which helped mitigate the loss from the stock market,” Walden said.
Although pandemics like Ebola and Zika outbreaks should be looked at individually, Walden said history shows the markets have been manageable.