During a stock-market selloff, how would you invest $100,000?

  • Written by MarketWatch
  • Published in Economics

After a wild Wednesday on Wall Street, investors are nervous.

What should you do with money sitting in your bank account? Take a theoretical $100,000. How should you invest it now? “Review your portfolio to see if there are any of your assets that you should now buy more of at lower prices,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors in Oklahoma City. Don’t react or act without a plan. “You should not change your current investment strategy if it was well thought out to begin with.”

The Dow Jones Industrial Average DJIA, -1.33%[1]  , plunged 831 points Wednesday in the worst day since the market correction last February. The market struggled to maintain positive ground Thursday. Many people are understandably concerned about what this means for their 401(k) accounts, but for those who have saved money as the economy has grown over the last nine years and are keen to invest their cash, it’s a particularly troubling time.

‘The time to buy is when the market is on sale, not when it’s selling at full price. Volatility is normal.’
Greg McBride, chief financial analyst at Bankrate.com

Word of warning: Do not sell into a market pullback, says Greg McBride, chief financial analyst at personal-finance site Bankrate.com. “When the market pulls back sharply, it creates a buying opportunity that didn’t previously exist. Valuations become more appealing and it gives you the chance to scoop up, or add to, positions you’ve wanted to accumulate but thought the price was too high. The time to buy is when the market is on sale, not when it’s selling at full price.”

“If the bulk of your wealth is tied up in home equity, then investing in the stock market for long-term needs and cash or high quality bonds for short-term needs is entirely appropriate,” he adds. If you don’t have an adequate emergency fund to cover six months’ worth of expenses, build that before you do anything. “Don’t let short bouts of market volatility distract you from the pursuit of your financial goals,” he says. “Volatility is normal.”

The reason for the volatility has been attributed to a series of events, including a rapidly rising interest-rate environment, the corporate buyback blackout period heading into third quarter earnings, selling pressure from risk-parity funds[2] and the deterioration of technical factors, trade concerns due to the tariff war with China[3] and uncertainty surrounding the mid-term elections.

“The recent volatility might be the result of all of these, a combination of these, or none of these,” says Marc Dizard, investment regional manager, west region at PNC Wealth Management in Cincinnati, Ohio. It’s difficult to...

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