Investors started off last week with panic. Due to uncertainties surrounding China's economy, the Dow Jones Industrial Average opened to an immediate 1,000-point loss. However, two days later, the Dow recovered and closed up 619 points by midweek. According to CNN Money, the surge was the third-largest point gain in history and biggest one-day gain in four years. This was a stark reversal from the previous days, when an estimated $1.2 trillion was erased from the S&P 500.
With the highs and lows all coming in one week, working individuals likely have many questions about what they should do in turbulent times. Everyone will hold different viewpoints, but there are some wealth management tips to remember as you continue to invest in the stock market.
Regardless of the current state of the economy, you should always build and maintain a diverse portfolio. This technique helps reduce risk because all your money is not with one company or financial area. You aren't totally protected against potential losses, but you're minimizing the risk.
According to Nolo, some areas you'll want to spread your wealth around in are real estate, bonds and stocks. Further, U.S. News & World Report said diverse portfolios should ideally have a time horizon of approximately 10 to 20 years.
"You should always build and maintain a diverse portfolio."
Keep an eye on numbers
It may seem counterintuitive, but the current economic landscape is very friendly toward buyers, despite the recent turbulence. In an interview with U.S. News & World Report, Berkeley Research Group president and chief investment officer Kevin Mahn said the stock market correction is beneficial for everyone. You'll reap the benefits of being able to afford popular technology and Internet companies' stocks, for instance.
Likewise, oil prices are currently at an all-time low and in the end, everyone but the oil-producing countries benefit. Oil was trading for $40 during the last full week of August, according to Bloomberg Business. Industries such as retail and transportation are the biggest beneficiaries, MarketWatch reported.
Know when to leave
In an interview with Inc. Magazine, Warren Buffett stressed the importance of knowing when to hold on to your options and when to sell. However, you shouldn't always rush to sell. Investing is a delicate balance of timing. Stay too long, and you may lose money, but sell too early, and you may not reap the benefits.
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