The Zhitong Finance App learned that on August 5, 2024, the stock market experienced the worst day of the year. On the same day, rising unemployment raised concerns in the market about the recession. The Dow Jones Industrial Average fell 2.6%, the S&P 500 fell 3%, and the Nasdaq Composite fell 3.4%. Despite the market panic that day, retail investors did not follow the large-scale sell-off.

According to the latest data from asset management company Vanguard, 97.5% of investors surveyed on its platform did not trade on August 5. Of those investors who traded, 73% chose to buy on dips, and only 17% chose to sell in a panic.

Thomas De Luca, a senior researcher at the Vanguard Investment Strategy Group, said in a statement: “Even in the face of pessimistic reports in the financial media, investors prefer to stick to strategies or buy at a discount rather than panic selling. Being disciplined in the face of fluctuations is encouraging, as it is one of the key factors for long-term investment success.”

This strategy has paid off for retail investors. Since August 5, the S&P 500 index has rebounded more than 10% to close on September 24. Retail investors who choose to buy on dips when the market falls may have reaped some of the benefits. Even if they didn't enter the market at the time, they might still be in the lead because the S&P 500 index had already reached a record high in September. Investors who chose to sell off missed this round of market rebound.

Moreover, retail investors remain calm amid market turmoil, while also being optimistic about the future performance of the stock market. According to Vanguard's survey, retail investors on average expect the stock market to return 6.2% within 12 months after August. They also believe that the probability of a stock market crash (defined as a 30% or more drop) within the next 12 months is only 4.4%.

Andy Reed, head of investor behavior research at Vanguard, stated in a statement: “Investors were not only unaffected by the brief market sell-off and the accelerated rise in unemployment, but were quite optimistic. They are boosted by steady economic growth, falling inflation, and market resilience.”