How Should You Invest Your Money in a Volatile Stock Market?
May 26, 2010 — -- The stock market has experienced volatility in recent weeks, due in part to upheaval in global trading.
Stock markets around the world fell Tuesday on worries that Europe's problems will slow global growth and demand for crude and gasoline, according to The Associated Press.
The Dow Jones Industrial Average was down more than 200 points and below the 10,000 mark for most of the day on Tuesday. It cut almost all the loss to close down about 23 points. The NASDAQ closed down slightly, while the S&P 500 closed a little higher.
So with all the instability in the markets, how should the average person invest his or her money?
Dave Ramsey, a radio host and financial guru, and Mellody Hobson, president of Ariel Investments and "Good Morning America's" personal finance expert, appeared on the show to offer some timely advice.
Q: I'm a regular investor. Is "stay the course" still the best strategy, given today's turbulent global market?
A: That is still the best strategy, according to Ramsey, who advised that people think about their investment decisions in the long-term. Hobson agreed, saying people shouldn't overreact when there are occasional disturbances in the global markets. She pointed out that while governments in Europe may be experiencing fiscal trouble, the U.S. government's fiscal foundation remained strong. The globe's interconnectedness means that markets' effects on each other will be felt more quickly, but that's no reason to make a rash decision, she said.
Q: Some people believe Tuesday's market activities were the precursor to a massive market crash. Why should they remain in the market at all?
A: Ramsey pointed out that the American economy was stronger than ever, with checks and balances in place to prevent the market from crashing again. Hobson mentioned that the stock market has continually outperformed other investments. The Dow Jones started the last century at 68 points and ended at 11,500, she said.
