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Putting the Dow drop into perspective

The Dow Jones takes its biggest one time drop in history. Down more than 1,000 points Monday, many investors are now wondering what to do next. Experts say the one thing you shouldn't do is panic. (Photo: NYSE / MGN Online)

The Dow Jones takes its biggest one time drop in history. Down more than 1,000 points Monday, many investors are now wondering what to do next. Experts say the one thing you shouldn't do is panic.

Overall, the market is still doing very well. The Dow is down 4.6 percent -- which doesn't crack the top 20 for largest percentage drops in history. Experts say what's happening now is likely a long awaited market correction that shouldn't last long.

The Dow Jones may be down 1,175 points but it's still up 50 percent over the last two years.

"Most of us have been expecting this type of correction to happen," explains John Doggett, senior lecturer at the University of Texas at Austin McCombs School of Business.

Doggett says overall the market is strong. "If it goes down another 2-3 percent I don't mind. If it goes down 5… 10… 15 percent you want to start moving some of your money out of the stock market and into the bond market where you have a guaranteed return," he explains.

Doggett says most experts expect the market to settle out in the coming days. For many the real question is not whether to sell but whether now is a good time to buy. "I know people who have bought today," Doggett adds. He says data suggests the Dow's drop is nothing more than a normal return of volatility to the stock market.

"I would not sell my stock right now because you'll take a paper loss and turn it into a real loss," Doggett says.

With many corporations reporting solid earnings and an overall healthy time for the U.S. and world economies he says staying calm and collected is the best thing to do. "You cannot be nervous because if this is your 401k… this is your retirement. You have to be disciplined. You have to look at the data. You cannot make an emotional decision. You have to make a data-based decision," Doggett says.

There's no way to predict what will happen come Tuesday, but experts say it's likely the Dow will drop a little bit more before turning up again.

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