Don't Touch Your Face. Or Your Stocks.

Expert offers advice in a volatile market week

Mar 12, 2020
Finance

SMITH BRAIN TRUST  For investors concerned about market uncertainty invoked by the coronavirus: Don’t touch your face and certainly don’t touch those stocks.

In what has been a volatile trading week on Wall Street amidst coronavirus fears with the Dow Jones entering bear market territory marking the end of an 11-year bull market run, investors may feel like they need to get out.

Maryland Smith’s David Kass says while the pandemic is serious, investors must keep calm and carry on.

“For people who are currently invested in the market, just don’t do anything and don’t panic,” says Kass, clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business. “You need to ignore the volatility and keep a long term outlook of several years.”

If you can afford it, Kass says, the stock market is still a good bet when it comes to growing funds at a rate faster than inflation. But everyone’s financial situation is different, he says, and investors should assess their own degree of risk tolerance. Aside from playing the long game, Kass says that a good rule of thumb for investors is to put as much money as they feel comfortable into the market.

“There’s no one answer for everybody,” says Kass. “But there is an old expression that if you’re losing sleep over your investments, you should sell down to your sleeping point. I think that that’s sound advice for seasoned and inexperienced investors alike.”

New investors who believe now is the moment to jump in may want to reconsider too, says Kass. With so many variables at play, it is hard to predict exactly how the markets are going to respond to breaking news. Any losses suffered early could be disheartening for new investors and may dissuade them from investing later on down the road, he says.

“Although it never hurts to get your toes wet when it comes to investing, waiting for the markets to stabilize is your best bet,” Kass says.

When it comes to short-term moves, Kass recommends putting aside adequate funds in a safe place for things you might need in the coming year like food, rent or education payments. You might consider safe investments, such as insured certificates of deposit, money market funds and Treasury bills,” says Kass. “But anything you know you will need in the next year, do not put that in the stock market.”

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About the Expert(s)

David Kass

Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Sophomore Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), FOX TV, Bloomberg Radio, Wharton Business Radio, KCBS Radio, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by The Wall Street Journal, Bloomberg News, The New York Times and The Washington Post, where he has primarily discussed Warren Buffett, Berkshire Hathaway, the economy, and the stock market. 

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