Here's how to respond to the coronavirus stock market panic

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

Managing Editor & Certified Financial Planner™

Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

Published January 30, 2020 | 1 min read

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Updated Feb. 25, 2020 The Dow plunged more than 1,000 points Monday, the worst day in two years, as fears about the coronavirus have spiked.

The virus, which causes respiratory symptoms like coughing and shortness of breath, was first identified in Wuhan, China. It has infected more than 80,000 people and killed over 2,700, according to the World Health Organization.

The outbreak, and the market response, has prompted headlines like "Global markets are on edge" and "U.S. stocks slide".

Slumping markets also pushed mortgage rates down (we have a weekly mortgage report here).

So how should you respond when the market panics?

Should you sell all of your stocks?

The short answer: No.

“Investors often react too much to the headlines. There’s definitely fear mongering,” said Kashif Ahmed, certified financial planner and president of American Private Wealth.

Viral outbreaks and other disasters often create uncertainty. Investors can’t predict the full impact of a virus, which often leads to sell-offs. But historical data shows the markets typically recover following an outbreak.

“Every time there’s an outbreak — like SARS, swine flu, ebola — investors react the same way,” said Ahmed. “These things come and go and if you’re planning for the long-term, you shouldn’t be too concerned about what’s happening right now.”

If you want to take action, your best bet is diversifying. Make sure you have a balance of high- to low-risk investments, Ahmed said. This mix gives you some security against the market’s ups and downs.

Here's a beginners guide to investing.

If you haven’t already, consider reaching out to a financial professional, said Karl Frank, certified financial planner and wealth manager at A&I financial services. They can explain the nature of the markets, give you advice on where to invest and help organize your finances.

Image: Freddie Collins