What to do, and not do amid Wall Street's wild ride

Volatility will likely be the byword on Wall Street for months to come and that’s going to cause investors to feel both euphoria and anxiety multiple times in the same day.

On Wednesday, the Dow Jones Industrial Average and other stock market indicators swung widely on news of President Donald Trump's changing tariffs policy and the response from China and Europe.

The Dow ended the day up about 3,000 points, or 7.9%. The S&P 500 climbed 9.5% to have its best day since 2008. And the Nasdaq Composite Index was up 12.2%.

The three indicators were in negative territory until Trump’s afternoon announcement that he was pausing the reciprocal tariffs for 90 days that had gone into effect hours earlier. He also hiked tariffs on Chinese exports to 125% in response to that country’s new tariffs on U.S. exports.

The dramatic market fluctuations, which have spanned nearly a week, are cause for concern among investors on Long Island. Many have invested for retirement, to purchase a home, pay college tuition and for other financial priorities.

On the Long Beach boardwalk Wednesday, Marc Gomez, a construction worker, estimated that he had already lost thousands of dollars in his 401(k) retirement account and 529 College Savings Plan.

“I’m worried, no doubt about that,” said Gomez, 45, of Island Park. “But I don’t know what to do. I feel like whatever decision I make will be the wrong one.”

Here are some things to do and not do in response to the market volatility based on interviews with financial planners, finance professors and mental health experts.

Do be patient

Investors shouldn’t make rash decisions. They should wait out their investments if possible because the markets will eventually rebound, said David Frisch, CEO of Frisch Financial Group, a Melville-based investment management and financial planning firm.

It took less than half of one year for the stock market to make a full recovery following the COVID-19 pandemic, which began in early 2020.

“The market was hit, and hit hard, and it took five months for the market to come back,”  Frisch recalled. “Five years later, anyone who held on would be up 80% after the drop.”

Do continue investing

With some stocks at all-time lows now may be a good time to buy. Investors who are more risk-averse could consider shifting from stocks to a money market fund or Roth IRA, he said.

Converting to a Roth IRA "can be best for clients who have no control and feel the need to do something to feel like they have control. Sometimes the hardest thing to do is nothing," Frisch said, adding the Roth offers tax advantages.

Do invest in dividend-paying stocks

Investors who are approaching retirement or rely on investment income to pay living expenses may consider putting some of their money in dividend-paying stocks, said Susan Quigley, a certified financial planner and owner of the investment firm SQuigley Financial in Garden City.

“You will still benefit if the market goes up, but you will be in blue-chip stocks that pay a dividend instead of a growth-oriented  mutual fund,” she said.

 Don’t invest too much

Wall Street is for long-term investments; money you don’t need for the next three to five years, Quigley said.

She said investors who require cash to pay their child’s college tuition for next semester, take a vacation or start a home improvement project should put the money in a savings account, a certificate of deposit or another short-term investment.

“Have a portfolio with investments that are less volatile so you can ride out the ups and downs,” Quigley said.  

  Don’t be impulsive

It’s easy to get caught up in whether the stock market is rising and falling. But basing investment decisions on impulse can lead to bad outcomes.

“You need to have a plan and stick with it,” said Andrew C. Spieler, the author of three books on investing and a finance professor at Hofstra University’s Frank G. Zarb School of Business. “If you invest regularly continue to do so because then you are never buying when stocks are too high or too low.”

He and others also said investors shouldn’t put their money in stocks, bonds and other investment vehicles that they don’t feel comfortable with or fully understand.

Don’t go it alone

Even when the markets are rising steadily, investors should seek input from a financial planner and do their homework.

“You shouldn’t do everything on your own,” Spieler said. “Get feedback from a financial adviser and use the online tools available from investment banks. This will help you assess your tolerance for risk and market volatility.”

Don’t follow every move in the markets

Market volatility causes investors to experience anxiety and stress. These emotions can lead to a loss of perspective, and in some cases, mental health problems.

Christopher Fisher, a psychologist at Northwell Zucker Hillside Hospital in Queens, suggested that investors limit their consumption of financial news, particularly alerts on cellphones.

“We make our best decisions when we maintain a balance between emotions and logic,” he said. “We need to reflect on past history — markets have crashed before, and they’ve always recovered.”

Fisher, who oversees the hospital's adult outpatient psychiatry department, said investors can avoid becoming stressed out by engaging in activities they enjoy, such as going to the gym, volunteering in the community and spending time with friends and family.

These “value-driven activities provide you with a sense of purpose, a sense of meaning that can help reduce the impact of these market fluctuations,” he said.