Local Financial Advisor Says Stay Calm - WRCBtv.com | Chattanooga News, Weather & Sports

Local Financial Advisor Says Stay Calm

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Monday was a wild day on Wall Street following the market's worst week in four years. The Dow Jones industrial average plunged more than 1,000 points just after the opening bell before recovering to close down 588 points. NASDAQ and the S&P 500 closed with nearly 4% losses. It all seemed to have started in China. Stocks were down 8% in Shanghai, 4.6% in Japan and 3% in London.

Investment advisor Lauren Templeton, co-author of "Investing the Templeton Way" joined us for Live at 5:30 to explain what was going on and what, if anything, we should be concerned about.

Sloppy and volatile were the words Templeton used to describe the day, but added, all-in-all, it ended up being a little sell-off. Noting that the market has declined 11.3% since peaking in early May, she called Monday an overdue correction, one that keeps the market healthy.

The price-to-earnings ratio (P/E ratio) is a good indicator of how the market is valued, Templeton added. The P/E for the Standard & Poor's 500 is at 16.4 times, which is the exact historical average back to 1954. So, if you are an investor looking for a fire sale, this probably will not be the time you will find it. While there may be some bargains to be had, Templeton says  if you invest in an index right now, you should only expect average returns.

Her advice for anyone who has a 401k who may be a little nervous given the headlines is simple. Do not do anything. Step away from the computer and the financial news for a few days and focus on the long-term.  If you are a little more adventurous and looking for the market to bottom out, she says, make your wish list of securities and if the market continues to decline, get ready to put your dollars to work.

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