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How Scared of the Stock Market Should You Be Right Now?

By Maurie Backman – Sep 26, 2021 at 7:36AM

Key Points

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Investors were recently taken on a wild ride. Should you be worried about your investments?

September has historically been a rocky month for the stock market, and this year has been no exception. Last week, stock values tumbled early on as COVID-19-related fears and concerns about China's property market spooked investors to their core. And while things have settled since then, it's hard to say what the next few months will look like as far as stocks are concerned.

Whether you're new to investing or have been at it for years, you may wondering how safe the stock market is right now and whether you should keep your money in it. Here's what you need to know.

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Image source: Getty Images.

There's always risk in stocks

Buying stocks is never a risk-free prospect. That holds true no matter how well or poorly the economy is doing and whether we're in the midst of a pandemic or not.

But one thing you should know is that the stock market has a long history of rewarding investors who stick with it for the long haul. We don't know how the stock market will perform over the next few months. The market could have a strong finish to 2021, or it could end the year on a sour note. But if you're not planning to cash out your portfolio within the next few months, then it really shouldn't matter how the market performs in the near term.

Along these lines, if you've assembled a nice portfolio of stocks, there's absolutely no reason to lose sleep over market turbulence. Even if the market underperforms in the next few months, if you leave your investments untouched, you'll give yourself time to ride out a near-term decline. And that's really the ticket to doing well as an investor -- keeping your eyes on the long-term prize.

How to prepare your portfolio for volatility

While there's certainly no need to rush out and sell off your stocks right now, one thing you should do is take a look at your portfolio and make sure it's nice and diversified. That means owning stocks across a range of market segments, or owning ETFs that offer built-in diversification.

It also wouldn't hurt to have some dividend stocks in your portfolio. Companies with a long history of paying dividends tend to keep doing so even during periods of market volatility. And so if you're worried about how the stock market will perform in the next few months, incoming dividend income may be a good thing to secure.

Keep things in perspective

Though the stock market crashes often, it's hard to predict exactly when it will tank. Your best bet as an investor is to look to the future and do your best to avoid getting rattled when things go south in the near term.

You may be a little (or very) scared to keep your money in the stock market right now. But if you stay the course, there's a good chance that in 10 years from now, that fear, along with the recent stock market sell-off, will be nothing more than a distant memory.

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