Conflict in the Middle East is wreaking havoc on oil prices and the stock market with the S&P 500 index down over three percent for the year. Before you panic, consider three things.
First, the market is up over 80% since January 2023. From that perspective, a three percent drop is more a blip. Second, even if your accounts are down for the year, you still own the same number of shares of stock. You just can’t sell them for as much right now as you could two months ago. Third, this is mostly a short-term reaction to the conflict. People are still buying goods and services, and corporate earnings are what drive stock prices in the long term.
If you have cash on the sidelines, this is a good time to buy into the market. If you are worried that stock prices may fall even further, consider dollar-cost averaging. If that sounds familiar, it’s because most people are already doing it.
Dollar cost averaging is when you buy the same dollar amount of investments on a set schedule. If you have a retirement account at work, you are already doing this by contributing the same amount each paycheck. If you have money in savings and want to invest it, your advisor should be able to hold the cash in your account and set up an automatic monthly purchase of investments.
When you do this, you’ll pay less per share than the average cost over the same time period. This happens naturally because when prices go up, you buy fewer shares, and when prices go down, that is, when stocks are on sale, you buy more. Market downturns while you are still working are actually a great opportunity.
Your action item this week is in memory of one of the best people I’ve ever known, Lea Hurt. Please, reach out to a friend or loved one to reconnect, touch base, or just let them know that you care.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.