Yesterday, the Dow fell 800 points, my phone news section blew up. “Dow Plummets” “Stock Market Crashes” etc. etc. It sounds super scary. I called my husband and joked, “So are we poor now?” He laughed. I told you all, we are finance nerds this is humor to us. Our sad comedy aside, what does this mean to you and me?

Let’s start with why it happened. We have had a great year in the market with everything soaring until the last couple of months. There is always a bit of a market correction when this happens, and it dips down, but this was bigger. People were selling primarily due to 2 things, 1. The rest of the world economies are slowing their financial growth faster than expected and 2. Our bond market interest rates flip flopped with short term bonds having higher interest rates than long term. Usually long term bonds have higher interest rates, because your money is tied up in them longer, so more risk, more return. These things indicate that we will likely have a recession which scares people, so they sell their stocks to cash out on any gains, before prices drop and they lose whatever they have made since purchasing these stocks. When everyone does this at the same time… CRASH!

As bad as all of this sounds, it is the cycle of the market and things will go up again. That is what it does, it goes up and down and up and down. People that left their money in the same stocks when it crashed in 2008 made the loss back within the year. What gets you in trouble is making an emotional decision and selling at the bottom for fear it may go lower then you have locked in your loss.

If you have a good financial advisor, your money will be invested according to your risk tolerance and it won’t matter what the market does. You will lose or gain according to your balanced portfolio, and the best plan is leave everything where it is and wait for the up swing (unless advised otherwise).

So how does it effect you? Unless every penny you have is invested in only S&P 500 stock, it shouldn’t. As I say whenever I talk about current events, the news just LOVES a scary headline.