Welcome to Black Monday, everyone.
Naturally, everyone is freaking out.
Its understandable, but dont do anything drastic just yet.
In short: we panic, and then make bad decisions.
Heres what to know about all the latest stock market crisis, including what you should do about it.
Why Is This Happening?
Chinas stock market is officially crashing, which is scaring investors all over the world.
Monday morning,their own index fell 8.5 percent, the lowest drop theyve seen since 2007.
There are concerns here in the U.S., too.
Theres the ongoing uncertainty aboutwhether or not the Federal Reserve will raise interest rates.
Translation: everyone in the world is freaking out, selling their stock, and driving down the market.
Ironically, the panic is only making things worse.
And when lots of people do that, it causes the market to continue plummeting.
These things happen, though.Its investing 101: the market goes up, then it goes down.
Your portfolio has just dropped in value.
You lose your money when you sell.
Selling your stock may mean you have to pay taxes on it, too.
So now were on the same page.
Step one: dont panic.
What You Should Do Instead
Wevetold you before that buy-and-hold investingis the way to go.
But if youre properly invested for the long-term, all you should do right now is: nothing.
Dont rush to sell all the stocks you own.
You probably dont want to pay much attention to them in general right now.
Weve told youwhere to park your savings, depending on your goal.
If anything, some ambitious investors even usestock market dips to buy low!
This does serve as a good reminder tokeep your portfolio balanced, though.
Because market volatility will happen again.
Will It Get Worse?
Sure, those economic issues we mentioned are concerning.
Experts are worried about Chinas economy.
Were still not sure about this whole Federal Reserve interest rate thing.
And oil prices might be cause for concern, too.
But these things happen, and this is a natural part of the process.
In fact, it might not be such a bad thing.
As Neil Irwin, senior economics correspondent for The New York Timesexplains it:
Its about time.
So will things get worse?
The short answer is: probably, but then it will probably get better.
Illustration by Sam Wooley.
