Welcome back to the scary days of stock market turbulence! After a reasonably calm couple years with an escalating prices, we are back to huge swings in the stock market. Ebola, wars, political turmoil, foreign recessions, elections….. nothing is worse for the market than uncertainty and fear.
During big market swings, it is easy to panic and sell, or predict the market has bottomed out and buy. But panic and market timing are not valid investment strategies. My friends that have done the worst with their investments tended to be reactionary, buying and selling based on the news of the day.
So what should you do? Recently Fidelity Investments undertook a major investigation of their best performing accounts. They wanted to find out the secrets of their best investors. And the common theme? The owners were all dead. Pretty hard to fly into a panic when you aren’t breathing. The top performing accounts were estates, with minimal management and trading – the ultimate buy and hold strategy.
Luckily, you don’t need to be dead to invest this way. For most people, an age-based investment allocation with low-cost index funds, periodically rebalanced, and locked-away to minimize trading and fees is the best way to make your money grow.