JUANA SUMMERS, HOST:
About 60% of Americans have some money in the stock market. If you are one of those people and you've recently logged into your investment account, you may be feeling a little bit alarmed. The markets have fallen lately. For instance, the S&P 500 dropped by 10% between mid-February and mid-March of this year. There are reasons - investor fears about tariffs or a possible recession. At the same time, when it comes to the stock market, ups and downs are just part of the deal. NPR Life Kit host Marielle Segarra has advice on what to do in moments like this one.
MARIELLE SEGARRA, BYLINE: Your instinct in these down moments might be to sell everything and never invest in the stock market again, but the advice here is don't do that and try not to panic. Bola Sokunbi is the founder-CEO of Clever Girl Finance, a financial education platform for women.
BOLA SOKUNBI: The truth is that when the market is declining, unless you actually sell it, you haven't lost anything. You still have the asset. You still have the stock that you invested in. And at this time, you really just want to ride out what's going on in the markets because economies are cyclical.
SEGARRA: Also, to put the current decline in perspective, the S&P 500 has seen 10 other drops of this magnitude or more since the financial crisis in 2008 and 2009, according to the consulting firm Yardeni Research. But stocks always came back up again. Also, several of the major stock market indexes are still up compared to where they were a year ago. A general rule with the stock market - if you have diverse investments, and if you stay the course and don't rush to sell your stocks when the market drops, over the long-term, you can expect to come out with more money than when you started.
SOKUNBI: So when you talk about investing in the stock market, historically, the average rate of return is about 8% after inflation or about 10% before inflation.
SEGARRA: That's per year. Now, let's talk about diverse investments for a second. You want to spread your money out, buy different kinds of bonds, buy stocks in lots of different companies from different sectors. One way to do that is through index funds.
SOKUNBI: Which is basically a benchmark that tracks something like, for example, the S&P 500, which are the 500 largest companies in the U.S. that are traded on the stock market, right? So that kind of helps you create a sense of less emotional turmoil because your money is invested across technology, health care, consumer staples, you know, so many different categories.
SEGARRA: If markets are down across the board, yeah, you will see the same in your index funds. But if it's just a couple of sectors or companies taking a hit, you own shares in other companies, and that'll limit your losses. Sokunbi says there are a lot of emotions that come up around investing. Excitement, yeah, but also fear and regret.
SOKUNBI: If you are investing for the long-term, which you should be, then give yourself a break. If you don't need the money anytime soon, then it's OK not to log into your account this week or this month or this quarter so that you're not overwhelming yourself.
SEGARRA: Also, she recommends keeping three to six months of basic living expenses in an FDIC or NCUA insured savings account. That way you have a financial cushion in the short-term regardless of what's happening in the stock market.
For NPR News, I'm Marielle Segarra.
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