How Should Investors React When the Market Drops 5% or More?

Earlier this year, investors got a reminder that stock prices don't always go straight up. The Iran war caused the S&P 500 (SNPINDEX: ^GSPC) to decline by 9% in March. The equity market has since recovered those losses, but it was a jolt that many investors didn't expect after a year of steadily rising stock prices.Unfortunately, my fears when a situation like this plays out came true -- people ran for the exits. The Vanguard S&P 500 ETF (NYSEMKT: VOO) saw a net outflow of $11 billion in March, only the second negative month in more than three years. Granted, it's only one ETF but this one tends to be a pretty good proxy for overall investor sentiment and behavior.Studies have consistently shown that investors don't earn nearly the same returns as the underlying indices due to mistimed trading. Some of those gaps can be significant.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool