Don’t panic – stay pat

When the market is volatile, as it has been lately, with lots of down days, you may want to get out of the market and then re-enter when things are better.

The main problem with this strategy is that you violate the number one rule of investing – buy low, sell high. You are selling low, because the market is down and you end up getting back in when the market is recovering (or recovered) so you buy high. And worse, you miss the initial uptick as the market recovers, which many times can be a significant gain.

So my advice – for long-term holdings (5 or more years) is stay the course; steady as she goes. It pays off in the long run.

Here’s a link to an article you may find interesting on this subject:

Number 3 in the article talks about diversifying. If you follow my advice you are in the Total US Stock Market Index Fund – almost 4,000 US Stocks (hard to get more diversified than that) and the Total Bond Index Fund – also very diversified and has lots of US Treasuries as part of its holdings.

I don’t agree with Number 4 in the article (sell a little if you must). I don’t believe in selling at all at this time, however, it is your money and ultimately you get to decide.

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