Experts Urge Patience, Discipline In Face of Stock Market's Wild Ride - NBC 7 San Diego

Experts Urge Patience, Discipline In Face of Stock Market's Wild Ride

Another wild day on Wall Street tests investors' willingness to absorb losses

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    NEWSLETTERS

    Markets Stage Comeback After Day of Whiplash

    NBC 7 Mari Payton talks with an SDSU researcher who said investors are worried about a possible trade war with China but in the long run, the stock market is an excellent investment.

    (Published Thursday, Dec. 27, 2018)

    It was another roller-coaster ride Thursday on Wall Street, impacting millions of Americans whose retirement accounts are invested in the stock market.

    The Dow Jones Industrial Average plunged more than 600 points in early trading, but in the closing hours made a big recovery, to end with a 157 point gain.

    This caps a very volatile week on Wall Street, in a very challenging year for investors, who have endured wild swings, up and down, in the market.

    Scott Kolman, a Wall Street veteran and lecturer in finance at SDSU’s business school, told NBC 7 it’s understandable that investors are worried about the market, and in some cases, selling their holdings in hopes of avoiding bigger losses.

    Finance professor and Wall Street veteran Scott Kolman admits it's a tough time to stay cool, about the stock market.

    But Kolman cautions against impulse selling.

    “My advice to everybody is, stick with their plan,” he said. “The worst investor is a panicker."

    Kolman said the market is volatile because the U.S. and world economies are somewhat unstable, and “investors like predictability.”

    NBC economic and business correspondent Ali Velshi agreed that investors are nervous, and hedging their bets.

    "The market is negative because of uncertainty,” Velshi said. “It’s largely caused (by) things like a trade war, and policies (investors) don't understand."

    There's also concern about more hikes in the U.S. interest rate, and President Trump's very public dispute with the Federal Reserve.

    "We have a volatile executive branch,” Kolman said. “We have a lot of instability in the executive branch of government."

    There's no telling if these stock market swings are the "new normal”, but they certainly defined the market this year.

    Market analyst Howard Silverblatt told the New York Times that the value of the S&P 500 has changed more than three percent 15 times this year.

    Such big swings did not happen even once in 2017.

    Computer generated trading gets some of the blame, but Kolman says computers don't program themselves, humans do.

    "Bottom line is, there's a lot of uncertainty in the world, and markets are grappling with the uncertainty," he said.

    Kolman also said big sell-offs historically happen every three to five years, so staying the course is the best strategy for long-term success.

    "If you're still investing or you’re still saving in your 401K, look at this as, 'I can buy more shares at a lower price,' and stick with your long-term plan," Kolman said.

    He also noted that big swings in stock market value are not what counts in the big picture.

    Kolman urged investors to focus more on the market's "average return," which has been a very respectable 10 percent per year, since World War II.