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Carroll County Times
Carroll County Times Opinion

Editorial: Doing nothing best stock market approach

For those who work in the investment community, yesterday wasn't likely an easy one. The Dow Jones Industrial Average took a precipitous plunge Monday morning, dropping 1,089 points or nearly 7 percent within the first hour of trading. In a roller-coaster of a day, one that saw stocks rebounding to only about only 115 points down, the market finally came to rest at a 588-point decline by the closing bell. It also declined 533 points on Friday.

The cause of the stock market volatility actually began Sunday night into Monday morning in China as that nation's market reacted to a decline in oil prices. The combination of China's significant investments in oil and its government's penchant for trying to manipulate the world economy for its own economic gain were chiefly to blame for the decline. The impact was felt here in large part because of China's investments in the U.S. economy.

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While some financial managers, both locally and around the world, fielded calls from clients who saw their investments and 401Ks dropping, most of us sat back and did nothing. It was probably all we knew how to do given the complexities of navigating the market.

And that was probably the best course of action for most of us, the experts said Monday afternoon.

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Market analysts likely spent a great portion of the day explaining market corrections, and most likely, telling their clients that a lower market means its a good day to buy, not sell off in a panic. We expect Tuesday's opening bell to stick with the old, "sell high, buy low." The stock market by practice, if not practical definition, is never a sure thing. There are risks, as any investment counselor will tell you, particularly in the short term. The key is to ride out the short-term declines over the long haul. But the stock market is also about consumer confidence. Shares only have the value of what someone is willing to pay for it. When the demand drops, so does the price.

It's really a simple equation, though the factors that influence are far from easy to understand for most of us. That's why standing pat made the most sense, even if the majority of investors didn't know it. Though if you're worried about it, think of what the past few days have meant to Microsoft guru Bill Gates. He lost $1 billion yesterday. Warren Buffet reportedly lost about $2 billion. Our guess is that they will be just fine. Long-term, we believe the economy will be as well.


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