Investors are getting a nice nudge on their portfolios today, but many financial advisers have been offering a cautious tone about following an up and down market too much.
Including last week, the Dow has closed up or down more than 200 points a remarkable 18 times since August 1, and analysts say they're expecting much of the same this week and beyond. Historically, October has been one of the bumpiest months of the year: This month claims eight of the 15 biggest single-day drops in the Dow's history, but also five of its seven best-performing days.
Indeed, news coming out this week could send markets has some analysts bracing for another wild ride: Third-quarter earnings season will be in full swing, retail sales for September will be unveiled and the release of the Federal Reserve's meeting minutes from last week is expected to offer insight for investors trying to read the economic tea leaves.
Today, the Dow rose more than 300 points as investors applauded the latest signs of progress in Europe's efforts to fix its debt problems.
"This is a very itchy trigger finger market and it is very hard to ignore it," says Allan Flader, a financial adviser in Phoenix for RBC Wealth Management.
The anxiety is understandable, says Joseph Tanious, a market strategist for J.P. Morgan Asset Management -- investors want clarity on the market's direction and are reading each event as perhaps signaling a longer-term trend.
But after doing some reacting of their own, and in same case shifting more clients to cash during the August's tailspin, many advisers are trying to prevent clients from overreacting to each piece of economic news, and the corresponding movements in the stock market. Flader is now telling his clients to ignore daily market moves and to only check their account statements on a monthly basis. Investors should re-evaluate their allocation every three or four months, he says, to rebalance and make sure their strategy still fits their long term goals. "People who check their investments daily or weekly make more mistakes," says Flader.
Some financial pros are advising their younger clients with plenty of working years left to pull back even more. Jonathan Satovsky, chief executive officer of Satovsky Asset Management in New York, says these clients should re-evaluate the mix of investments in their portfolios only after major life events -- such as having a child, changing jobs or buying a house.
Another thing to focus on in during these dizzying market days, say pros: your 401(k) balance. Investors who keep contributing throughout periods of volatility may often come out ahead of people who stop contributing or move their savings to cash. An analysis by Fidelity of how investors reacted during the downturn found that those plan participants who maintained their allocations throughout 2008-2009 market downturn saw their 401(k) balances increase by an average 50% through June since September 2008 compared to a 25% increase for those who temporarily pulled out of stocks during the market decline.