But is this market correction a real indication that we should panic? The underlying economy still looks strong. GDP may slow down from the 3.5% - 4.0% growth rates it has experienced the last 5 years, but a recession does not look likely. Companies are still hiring. Overall unemployment is near a record low of 4.5%. And look at these unemployment rates by education:
Less than High School education - 7.1%
High School diploma - 4.3%
some college education 3.9%
College Bachelors - 1.9%
So when there is a market correction, and the economy looks good (or not) what should you do?
- not panic - in fact, if you are using dollar cost averaging to invest just keep putting the same amount into savings
- stay in an index fund - if the economy is going to tank, individual stocks are the most risky. Stay in a index fund that represents the market.
- diversify out of stocks. Yes, I know that stocks market investing is passive and you don't have to do much. But starting a small business is the best way to diversify. And this is where most of the job creation is coming from - not Fortune 500 companies.