Although U.S. stocks rebounded on Tuesday (17th), U.S. stocks have actually been in a prolonged sell-off, and many investors may be wondering: What should they do in such a volatile market? Some well-known financial gurus, such as Warren Buffett, support a simple investment strategy: “Don’t pay close attention to the market!”
In 2016, during a period of high market volatility, Buffett advised against paying close attention to the market when the stock market is falling!
Buffett mentioned that investors who buy quality companies will see results in 10, 20 and 30 years over time, and if they try to buy or sell stocks during a stock market downturn, they won’t have great results.
Buffett said that the money is to invest in good companies for the long term, which is what people should do in the stock market. Many experts, including stock gods, also recommend index funds. For example, the Standard & Poor’s index fund includes well-known American companies such as Apple and Amazon.
The late Jack Bogle, the legendary investor, founder of Vanguard Group, and father of index funds, backed this approach. For most investors, trying to react to market trends can be counterproductive, and the best course of action is to wait.
Buying stocks and holding them for the long term is the best way to invest, Bogle explained, because if an investor tries to sell to avoid a crash and then reinvest, “emotions will totally beat you.”
Bogle said: “Go through and don’t let these changes in the market, even big ones (like the financial crisis) … change the minds of investors, never, never, never get in and out of the market. Always stay at a certain level.”
Ashton Lawrence, a financial planner and partner at Goldfinch Wealth Management, said that if you have a diversified portfolio, just buy some index funds, and you can hold them long enough, then the best thing to do is to follow the ups and downs of the market.
Sean M. Pearson, a financial advisor at Ameriprise Financial, said investors who sell in a down market could end up sabotaging their long-term investment plans. If you miss a rally because of frequent entry into the stock market, there is a good chance that investors will find it harder to achieve their financial goals.