Due to recent prevalent Corona virus fears, the market had faced a definite speed bump. According to the information given by the Dow index, a market correction was experienced by 30 of the largest US companies last week. A market correction occurs in the event that a major index has fallen at least 10% from its record high.
The Dow faced a big drop during the Coronavirus pandemic. This may have happened due to volatile markets caused by fear-ridden investors who fled equities. The majority of alarm was due to the fact that the virus COVID-19 was spreading rapidly around the globe and may have had an immense economic impact.
Last year, statistics showed that over a third of 1800 millennials made investments in taxable brokerage accounts. Another third of them had retirement accounts in addition.
But before you panic about the imminent market corrections, it is safe to say that these corrections are quite normal. Investment firms looked up market corrections from the late 1940s till today and noted that market corrections with a decline of about 10 to 20% occurred a couple of times each year. Furthermore, to quote Liz Ann Sonders, chief investment strategist at Charles Schwab, “Investing should never be about a moment in time; it should always be about a process over time”.
So how will market downturns work better for millennials?
The majority of millennials are aged 24 to 39. That gives them a long time horizon for their investments, so notwithstanding current market recessions and downturns, they have a lot of time for their investments to bounce back. These market downturns and declines are a normal part of a healthy market cycle.
A silver lining for millennials right now is that typically, they opt for investing lower sums of money instead of big lumps, and hence take a smaller hit if their investments sink. However, this is also the best time to buy shares and investments at a lower price and sit on them until they deliver.
As a matter of fact, millennials are in bigger danger of facing unemployment than stock market downturns because if a recession does indeed occur, companies will have to lay off employees to balance less revenue.
What to do
Industry experts and strategists are of the view that in the current climate, making regular contributions to your 401(k) plan and keep investing is the best path to follow. The regular influx of money into investment accounts is very beneficial for long-term investors as it helps to prevent them from becoming emotionally invested and ensures they do not sell during market lows or buy during market highs.
Another favorable step to take would be to rebalance your portfolio, which helps you get back in line with your financial goals and risk tolerance.
Lastly, millennials need to take a deep breath and realize that although similar, this is a relatively small financial crisis as compared to 2008 one, and the outlook looks pretty good for the future.
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