Visions of the Dow dropping 500, 600 or 800 points in a day keeping you up at night?
Trust me, you're not alone.
Watching the stock market basically dive off a cliff on a regular basis isn't easy on the nerves — or the 401(k) account balance for that matter. The Dow Jones industrial average took investors on a wild ride this week. In a span of three trading days, it dropped 1,150 points, or 4.5 percent, to 24,389.
It ended Friday on downbeat note, tumbling 559 points. And that swoon followed Thursday's decline of 79 points after an intraday plunge of 784 points and Tuesday's 799 point dive, the Dow's fourth-biggest ever.
No doubt, it was angst-inducing action. But if you own stocks in a retirement plan or trade them on your smartphone you have to find a way to deal with fear and anxiety now that wild swings, big price dives and amplified volatility have come roaring back on Wall Street.
The good news? You're not overreacting to the market's recent change in temperament. The turbulence is real. Data doesn't lie.
After Friday's 2.3 percent drop, the Standard & Poor's 500 stock index has closed up or down more than 2 percent on 15 trading days this year, marking the most swings of that size since 2011, S&P Dow Jones Indices data show. And the big moves, which include those triple-digit drops suffered by the Dow, likely freak you out more because there wasn't a single day last year when the broad market closed up or down more than 2 percent.
Here's some tips on how you can better cope with the psychological and emotional strain of a market that currently is wracking up paper losses in your accounts.
Don’t get caught up in the points
Sure, the Dow's 559-point downdraft Friday and 799-point plunge on Tuesday can create enough stress to cause your blood pressure to spike. But with the Dow now trading above 24,000, declines of 500 points "ain't what it used to be," quipped Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
His data, which dates back to 1896, show the Dow has closed up or down at least 500 points 38 times. The first such move was the 508-point drop on Oct. 19, 1987 — a day known as Black Monday because of the gargantuan 22.6 percent loss.
When it comes to percentages, the Dow closed Friday down 9.1 percent from its October high. What's more, in a typical year, the market has suffered an average drop of 13 percent, says Brad McMillan, chief investment officer at Commonwealth Financial Network. "So this is well within the normal range," he says.
Shift to more defensive posture
If the recent volatility has made you nervous and caused you to lose more of your money than you are comfortable with, now's the time to consider dialing back your risk, says Ben Phillips,chief investment officer of EventShares.
"We think investors should be using market rallies to position their portfolios more defensively," he told USA TODAY. "While markets appear to be oversold on short-term metrics, we feel stocks could fall much further if the U.S.-China trade disputes continue to escalate and (cause) a slowdown."
Raise cash if you might need it
First, make sure your plan is still in line with your objectives.
"If it is ... stick with the plan and remind yourself that you're a long-term investor and not a day trader," says Diahann Lassus of wealth management firm Lassus Wherley.
But there's one exception, she says.
"If you have a need for cash in the near term, you may want to raise a little extra in case this volatility continues," she says,
Employ a "barbell" strategy
Now's a good time to build a portfolio that provides both offense and defense, says Joe Quinlan, market strategist at U.S. Trust.
He recommends that on one side, investors add to their stock investments in areas such as health care, defense, cybersecurity and technology. On the other side, add to your helpings of short-duration bonds as a way of lowering your risk.
Consider buying the dip
If you have the courage, now might be a time to step in to buy stocks when they are beaten down and on sale, says Thorne Perkin, president of Papamarkou Wellner Asset Management.
The worst reaction is to panic and sell, as there's a good chance you could miss a stock bounce back in this environment, he says. The Dow's 706-point rebound off its intraday low Thursday was a perfect example.
If you have some cash sitting on the sidelines, now's the time to consider going on the offensive and buying stocks on weakness.
"Stock market fortunes," Perkin says, "are built buying on market dips, not peaks."
This article originally appeared on USA TODAY: Market volatility is back. How to survive the stock market's wild swings