There are plenty of experts and non-experts expounding on what happened yesterday in the market (DJIA down 513 continuing a run of a 12% loss in just under 2 weeks). Far be it for me to miss out on this opportunity to do the same!
When we return to the roots of why we invest in stocks in the first place, we do so because of the expectation of higher returns than other investments. It's a very simple risk-vs-return tradeoff. We expect the return because we assume the risk. Of course, there is no guarantee that our expectation will be met but, historically, it has. Short-term volatility (i.e. risk) in equities or other appreciable assets is common but varies in intensity and magnitude. And it happens very regularly. When it happens on the upside (which it does), we tend to not notice, but when we see the numbers turn red - whoa!
But if you always remember that investing in "the market" is only advised for long-term pursuits, then the short term doesn't really matter. My planning clients have all seen the Monte Carlo and historical market simulations etc and know that nutty days like yesterday have been accounted for and that current market volatility changes nothing. For my non-clients reading this, is this market making you a little nervous and have you considered selling off (or already sold off) some or more of your market investments? I understand the emotion behind what you're thinking, however the key to disciplined investing is to be able to put your emotions aside and think rationally about your goals and investment strategy.
As the Dalbar study says year after year, emotions decimate potential returns for the average do-it-yourselfer. If you find that you lack the discipline to go it alone, find a trusted fee-only advisor through NAPFA that can give you the discipline and confidence to stay invested and reach your goals.
But back to yesterday - there are plenty of professional panickers and eternal optimists blogging their take on What To Do Now™ and whatever your viewpoint on current economic events and market volatility, you'll find others that will agree with you. But opinions are like feet - everyone has 'em and half of them aren't right. As David Booth, founder of Dimensional Fund Advisors, states - "The important thing about having an investment philosophy is that you have one." So, if you're an advisor and you're getting calls from your panicked clients, then you either don't have or haven't fully explained your investment philosophy to your clients. If you're an investor who isn't getting sufficient answers from your advisor, see if there's one out there that is a fit for your philosophy. Or if you're an investor that insists on going it alone, put your philosophy in writing and keep it handy for when times like this come to ensure that you stay on track. Good luck and let's see what today brings...