Prepare for a lot of red today. Global markets are down in response to the U.K. referendum to leave the European Union. Some traders are saying they haven’t seen volatility like this since 2008, which can be a lesson for individual investors.
When markets go crazy, investors seeing sharp declines in their retirement or other accounts might feel the urge to sell and cut their losses. Jennifer Myers, a financial planner and president of Sagevest Wealth Management in Virginia, warned that people shouldn’t panic.
“Investors should not sell into this unless they have short-term liquidity needs,” she said.
Even then, she cautioned, investors should sell in stages. She said she tells her clients if they have the cash, this might be a buying opportunity.
“Markets are potentially overacting,” she said. “There’s going to be uncertainty, and then there will be more uncertainty. So we are probably moving into a period of heightened volatility, and long term, investors will benefit from taking advantage of buying as things get cheaper versus selling when things are already cheaper.”
Personal finance expert and host of the “So Money” podcast Farnoosh Torabi agrees investors should “avoid knee-jerk reactions”.
“While the Brexit vote has massive implications for the global economy and the markets are taking a beating today, this does not mean individual investors should panic and sell,” she told Marketplace via e-mail. “What goes down will go back up and again, and you’ll be happy to know that you didn’t make any impulsive moves in your portfolio surrounding this news. If anything, this may be a smart time to pick up some beaten-down shares for your retirement portfolio.”