When the market is selling off, don't watch the market closely

When the market is selling off, don't watch the market closely

 

The financial market is going through a period of extreme volatility and is still in a downtrend. In particular, the Dow Jones recorded 7 consecutive weeks of decline, the longest since 2001, while the S&P 500 had 6 weeks of decline - the longest losing streak since June 2011, according to CNBC.


While many investors are wondering what to do during a period of market volatility like this, investment legend Warren Buffett advises: Try not to worry too much about this. “I would say: Don't watch the market too closely,” Buffett told CNBC in 2016.



The Oracle of Omaha added that investors who buy shares of "good companies" over time will reap the rewards in the next 10, 20 and 30 years.


“If they try to buy and sell stocks (in times of volatility), they won't get good results,” he said. “Investment returns are made by owning stocks of good companies for a long time. That's what investors should do with stocks."



Warren Buffett

Many experts, including Mr. Buffett, also recommend buying index funds, which automatically diversify and hold every stock included in the index. For example, the S&P 500 index includes shares of many large US companies such as Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).



Like Mr. Buffett, the late Jack Bogle recommends that investors adhere to a "buy and hold" strategy. He previously shared that buying and holding stocks for the long term is the best investment because “emotions will knock you down” if you try to sell stocks to “cut your losses” and then buy. again.



“Be consistent,” Mr. Bogle said in 2018. “Don't let swings in the market, even extreme volatility (like a financial crisis)… change your mind. Never enter or exit the market at those times. Always stay in the market to a certain extent.”


For most investors, trying to react to market trends can be counterproductive, according to many financial experts. They advise that it is better to wait for the ups and downs of the market to pass.


“If you have a diversified portfolio, if you only buy index funds and have a long enough timeout, you are in the best position to ride out this roller coaster of volatility,” said Ashton Lawrence. , a partner at Goldfinch Wealth Management, said.


Sean M. Pearson, Financial Advisor at Ameriprise Financial, thinks that investors who sell stocks when the market is down could face failure in their long-term plans.


“Once the plunge stops, the market will start going up,” Mr. Pearson said. “At a time when the news looks a little better, the market has already recovered. And if you miss the recovery, you will have a harder time reaching your financial goals.”

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