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Wash Your Hands But Don’t Sell Your Stocks

The massive sell-off in the stock market the past two days has made investors wary of a longer correction. People are concerned the implications of COVID-19 might have on the economy. While we should all take precautions for our health, selling your stocks is not advisable.

Avoid panic selling and instead stick to your previous investment and retirement goals.


Sell-offs are often short-lived and are often overreactions to current market, economic, geopolitical news or in this case global viral outbreaks. During the 2003 SARS outbreak the markets sold 12.8% over a 38 day period. While its highly probable stocks will continue to sell-off, changing your investment strategy during volatile markets is generally a costly approach. 


Equities are seeking a reason for a long-awaited correction and many are likely over-valued. 


A temporary sell-off in the market does not mean investors should sell their investments in a 401(k) or IRA and go to cash. Too many investors sit on the sidelines and wait for reasons to enter the market again, but instead lose out on opportunity costs. 


Protect your retirement investments and instead view this downturn as an opportunity to buy stocks at a discount. 


Corrections in the stock market are part of the economic footprint. The average stock market correction since 1980 is 13.9% annually. 


History indicates that stocks rise over the long term -  from 1926 through 2013, large company stocks generated an average mean return of 12.1% while long-term corporate and government bonds had average annual returns of 6%.


Since March 2009, there were 18 2% or more declines in the market on Mondays. The S&P 500, a broad-based benchmark, reported an average gain of over 1% on the following day, plus increases of  3.16% over the next week (positive returns 17/18 times) and  6.08% over the next month (positive returns 17/18 times, according to a tweet from Carl Quintanilla, a CNBC anchor citing data from Bespoke and FactSet.


Stock markets always rebound. The market even rebounded after the crash of Black Monday,  Oct. 19, 1987, when the Dow Jones Industrial Average declined by 508 points or 22.6%.


Riding out downturns in the market means you are not selling your stocks at their lowest prices


Sonoma Wealth Advisors is a registered investment adviser and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.  The information presented is for educational purposes and believed to be factual, but we do not guarantee its accuracy and it should not be regarded as a complete analysis. All expressions of opinion reflect the judgment of the author/presenter as of the date of publication and are subject to change and do not constitute personalized investment advice. An investment adviser representative should be consulted directly before implementing any investment strategy. Investments are subject to market risks and the potential loss of the entire principal amount invested. Past performance is no guarantee of future results.

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