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    Bezos’ Net Worth Plummets: What That Could Mean for the Average American

    By Jordan Rosenfeld,

    10 hours ago
    https://img.particlenews.com/image.php?url=1WSdId_0v1a2uLd00
    Nattakorn Maneerat / iStock.com

    In early August, the stock market experienced a significant dip, likely resulting from poor tech stock performance and fears of an economic slowdown, among other indicators, making billionaires like Jeff Bezos about $16 billion dollars “poorer.”

    Read More: 3 Types of Investments Predicted To Plummet in Value in Summer 2024

    Try This: 6 Money Moves You Must Make If You Want To Be Like the Wealthy

    When billionaires lose billions, it sounds alarming, but what impact does it have on the average American, whose investments are likely far more meager?

    Stock market experts explain whether billionaires are the canaries in the coalmine of your finances — or if such market corrections are just part of being invested in the stock market .

    Money mistakes the super wealthy never make - that you might be doing now.

    Market Corrections Are a Natural Part of Stock Market Flow

    Market corrections are a natural part of the stock market’s ebb and flow, and their impact varies depending on the type of investor, according to Edward Corona, trader, strategist and publisher of The Options Oracle Newsletter . However, these corrections have vastly different effects on people, depending upon their net worth and how they’re invested.

    Find Out: I’m a Self-Made Millionaire: 5 Stocks You Shouldn’t Sell

    Who Really Gets Hurt Financially?

    “When the market experiences a correction, billionaire traders and investors often rely on sophisticated algorithms that automatically execute trades,” Corona said.

    “For them, a drop in the market might be a mere blip; their extensive resources and diversified portfolios mean they can recoup losses quickly. These guys are often less affected by short-term volatility because they can afford to ride out the storm and even capitalize on it.”

    However, the story is different for small retail traders, Corona pointed out. A significant correction can set them back considerably, especially if their accounts aren’t well-balanced or diversified.

    “Small traders who are heavily invested in just a few stocks or who are using leveraged positions may face the risk of being wiped out during a correction,” Corona said.

    Lack of Diversification

    The real danger for the average investor is being invested in a non-diverse portfolio, Corona said. “Without a safety net of diversified investments or the financial cushion that billionaires have, small traders can see a significant portion of their portfolios eroded in a short period.”

    Long Term Investors Have Less To Worry About

    However, for the average long-term investor, market corrections typically have little long-term impact, Corona said. While it can be unsettling to see a portfolio’s value drop, history has shown that the market tends to recover over time.

    “Stocks generally go up in the long run, and the market has been dealing with corrections since its inception,” he explained. “Corrections can actually present opportunities to buy quality stocks at a discount. As long as the average investor maintains a diversified portfolio and stays focused on long-term goals, they can weather the storm without too much concern.”

    It Depends On How You’re Invested

    The effect of a market correction really depends upon how your assets are allocated, according to Robert R. Johnson, a certified financial analyst and a professor of finance at Heider College of Business at Creighton University .

    For investors who have little exposure to the stock market — perhaps they are invested in CDs and government bonds — corrections have little impact on the net worth of individuals, he explained. “For those with 401(k) plans or IRAs that are invested in stock ETFs, mutual funds or individual stocks, corrections may have dramatic impacts on the values of these accounts.”

    However, even if you are invested in those things, a correction does not mean that you should make any immediate changes, Johnson insisted.

    “Many people think that they can avoid market declines by moving in and out of the market. A mistake many investors make is attempting to time the market. Attempting to time the market is ‘fools gold,'” he said.

    Johnson quoted Vanguard founder Jack Bogle who has said, on the topic of market timing, that nobody he knows has done it successfully and consistently, so one shouldn’t try.

    Practice Dollar Cost Averaging

    Instead, Johnson recommended practicing “dollar cost averaging in a broad based stock market mutual fund or ETF — like one that tracks the S&P 500.” That means you are consistently buying into the market whether it has headed up, down or sideways.

    As for what investors should do in volatile times, he likes Warren Buffett’s advice to “re-watch their favorite Super Bowl commercials, get ice cream with their kids and say hi to a friend they haven’t spoken with in a while.”

    In other words, if you have a long term time horizon, this too shall pass.

    “Remember, time in the market is more important than timing the market,” Johnson said.

    Don’t Panic

    In other words, Johnson urged, don’t panic. “Investors should not concern themselves with broad market moves or the crisis de jour.”

    Instead, have a thoughtful investment plan that lays out your risk tolerance and time horizon, considers your tax circumstances and your proximity to retirement. He recommends having a written document, known as an investment policy statement (IPS), that “sets out the ground rules of the investment process.

    “The whole point of an IPS is to guide you through changing market conditions. It should not be changed as a result of market fluctuations. It only needs to be revised when your individual circumstances change — perhaps a divorce or other unanticipated life change,” he said.

    If you’re close to retirement or need access to some of the funds that may be affected, you can always consult with a financial advisor . Otherwise, patience and staying the course will generally be good enough.

    This article originally appeared on GOBankingRates.com : Bezos’ Net Worth Plummets: What That Could Mean for the Average American

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