What the Record 1,175-Point Dow Jones Drop Really Means (Hint: Not Much)

Trader Frederick Reimer works on the floor of the New York Stock Exchange, Tuesday, Feb. 6, 2018
Trader Frederick Reimer works on the floor of the New York Stock Exchange, Tuesday, Feb. 6, 2018. Richard Drew/AP Photo

Yesterday, the Dow Jones dropped by a record 1,175 points. Yikes.

If you’ve been checking out your 401(k) or other investments in recent months and giggling as they skyrocketed upward, this sudden turn of events is shocking.

What should you do? Is it time to sell? Get out while the getting is still good? What does this mean for you and your financial future?

Honestly, not much. At least not yet. The stock market is just doing its thing.

The Dow Jones Big Picture

The Dow Jones industrial average has been a wild ride this year. It wasn’t very long ago (Aug. 1, 2017, to be exact) that it closed at 22,000 for the first time in history. Since then, it has continued to climb.

Thanks to the stock market’s continued growth, we’ve become accustomed to seeing our own portfolios rise and rise. So when you see a fall of 1,175, yeah, it’s a bit of a shock.

But before you hit the panic button, consider these things.

  • The Dow closed Monday at 24,345.75 points. Yes, that’s lower than it has been lately, but that number seemed unthinkably high just a few months ago.
  • If you’re planning for retirement or any other long-term investment, you can’t afford to freak out over short-term fluctuations in the stock market. Most long-term investors are best off simply waiting it out.
  • While the Dow dropped by 4.6% on Monday, and that number was close to 10% below its January high, it’s nothing compared with the 22.6% drop on Black Monday, Oct. 19, 1987.

Jaime Quiros, a certified financial planner at FBB Capital Partners, told CNN Money that “this is just a natural breath in the market. We were expecting a correction throughout all 2017, we were expecting it to take a breath. How deep it is we just don’t know.”

While it sounds scary to hear that we just had the largest point drop in Dow Jones history, it’s important to consider the context. The higher the Dow Jones number, the larger the ups and downs will be by point value.

If you want to play the comparison game, focus on the percentage between now and the epic falls of years past. Then, take a breath of your own, and trust the market to correct itself.

Tyler Omoth is a senior writer at The Penny Hoarder who loves soaking up the sun and finding creative ways to help others. Catch him on Twitter at @Tyomoth.

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