In the middle of a stock market selloff, what should investors do?

Stocks plunged on Monday amid fears about the U.S. economy potentially slipping into a recession, with major indices suffering their worst days in nearly two years and leaving some investors concerned about their portfolios and how they should respond to a market downturn.

The Dow Jones Industrial Average tumbled 1,033.99 points, or 2.6%, while the Nasdaq Composite and S&P 500 fell 3.43% and 3%, respectively. The Dow and S&P closed out their worst day since September 2022.

Amid the market turmoil, financial experts urged investors to understand that volatility is a fact of life in financial markets and that they should think carefully before selling investments during a downturn.

“Volatility is inevitable. We can’t know when it will happen, but we know that it will,” Fran Kinniry, principal and head of Vanguard’s Investment Advisory Research Center, told FOX Business. “While it’s really hard to do, it has historically been better not to sell during a panic.”

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Kinniry noted that drawdowns like what the U.S. stock market experienced on Monday occur periodically and that the current market pullback isn’t outside the norm.

“For U.S. focused investors, it’s worth noting that we are not outside ‘business as usual’ for the world’s largest equity market,” Kinniry explained. “Based on the lowest tick in S&P 500 futures so far [Monday] morning, the U.S. bellwether would only be in a 7.4% drawdown from its July 16th high. Historically, drawdowns of that magnitude are very much par for the course, with a median intra-year maximum drawdown of 10% since 1985.”

Rita Assaf, vice president of retirement products at Fidelity Investments, told FOX Business that the “key to weathering any market volatility is being prepared with a long-term investing plan and staying the course. It’s impossible to predict the direction of the markets, but it’s important to remember that downturns are normal. While market downturns may be unsettling, history shows stocks have recovered and delivered long-term gains.”

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Assaf said that Fidelity emphasizes that investors should be “focusing on time in the market – not trying to time the market.” 

“While it can be tempting to try to sell out of stocks to avoid downturns, it’s difficult to time it right,” Assaf explained. “If you sell and are still on the sidelines during a recovery, it can be difficult to catch up. Missing even a few of the best days in the market can significantly undermine your performance. In fact, investing during recessions has historically led to strong investment results.”

“For some, when there is a downturn, it’s an opportunity to buy depending on their goals. We encourage people to regularly review their investment objectives and develop a diversified portfolio designed for their needs and goals (e.g. one that is not too concentrated in individual stocks and can withstand all market environments,” she added.

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Assaf noted that financial advisors may be able to help an investor take advantage of a down market, such as by taking losses on some of their investments to reduce future tax bills – or use lower share prices to convert to a Roth IRA at a lower tax cost.

Kinniry noted that investors have seen solid returns over the past year despite the recent slide that began last week and said, “Unless an investor was investing a lump sum and placed most of their money in the markets for the first time in the past few weeks, it has been a great time to be invested.” 

He pointed to year to date returns for several funds as of Friday’s market close that showed the total U.S. stock market was up 12% in 2024 and 19% over the past year.

“Investors and advisors should remain patient, adhere to their long-term financial plans, and try their best to tune out the market noise,” Kinniry said. “Think about the benefits of a broadly diversified portfolio, including exposure to global equities which can provide protection from domestic market or economic shocks. And importantly, know that time in the markets is better than market timing.”

FOX Business’ Matthew Kazin contributed to this report.