Concerned About a Market Dip? Here Are 3 Key Tips to Keep You Grounded

The S&P 500 and Nasdaq Composite Index both had an impressive start to the year, with each index gaining around 20% by mid-July. However, in the last month, they've experienced a bit of a pullback, although both have shown signs of recovery.

Such dips can be unsettling, even for experienced investors. If you're feeling anxious about the possibility of a market sell-off, here are three essential pieces of advice. These tips will help you regain focus and stay on track toward your long-term investment goals.

1. Market Sell-Offs Are a Normal Part of Investing

The stock market is one of the most effective ways for the average person to build lasting wealth. Historically, the S&P 500 has delivered an average annual return of about 10%, which means your investment could double roughly every seven years—a fantastic outcome.

However, the journey to those returns is rarely smooth. Volatility is an inherent part of investing, and every investor must learn to navigate the market’s ups and downs. The mood of market participants can shift rapidly, leading to sudden changes in stock prices.

A helpful rule of thumb comes from Giverny Capital, a Canadian investment firm. They suggest that, on average, you can expect the market to experience a 10% decline about once every three years.

In recent years, we’ve seen several market dips, each triggered by different factors. Whether it was the pandemic in 2020, rapidly rising interest rates in 2022, or the rotation out of tech stocks in 2024, negative headlines will always surface from time to time.

Recognizing that sell-offs are a normal part of the investing process can help you stay calm and focused when they occur.