Right Now You Need To Do Nothing

“Your best move is to stay invested and keep your fingers crossed.”-Jack Bogle, founder, Vanguard Group

The original publication of this article can be found here. 

The following is an interview done by CNBC with Vanguard founder Jack Bogle. Mr Bogle is a very wise man and all individual investors should listen closely to his advice. 

In the wake of the market’s worst week since 2011, the question for individual investors is what to do?

Nothing, says Jack Bogle, the legendary founder of the world’s largest mutual fund company, Malvern, Pennsylvania-based Vanguard Group. “I’ve seen turbulence in the market,” he said. “This is not real turbulence.”

“Don’t do something. Just stand there,” he quips. Aside from concerns about debt, the long-term fundamentals in the U.S. economy are sound, he pointed out. Unless you need your money in the short term, leaving your money in a portfolio with the right weighting of stocks for your age and risk tolerance still gives you the best chance for success in the long term—even in a volatile or falling market. Bogle himself isn’t making a move.

Most market corrections are just that—corrections, and it’s better to stay in the market to capture the rebound, which usually brings the market back up to previous levels and then some. Even the worst-case scenario —like the financial crisis and the lost decade of the 2000s—is not as bad as some investors might imagine. If you stayed invested throughout the 2000s, you would have lost an average of less than 1 percent a year, Bogle pointed out. That’s substantial, but not a nightmare. Many investors lost more than that because they sold in a panic near the bottom in 2008-09.

“I have advice for long-term investors,” he said. “I have no advice for speculators.”

The markets are far from that worst-case scenario, though there are concerns. The Dow Jones industrial average and the Nasdaq both fell more than 3 percent last week, into correction territory, and the S&P 500 dropped to a level that is 7.6 percent off its 52-week high. The last time the Dow closed more than 500 points lower was Aug. 10, 2011. August is often a volatile month in the U.S. stock market, because trading volumes are low.

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Casey Smith is owner and president of Wiser® Wealth Management, a wealth management firm based in Marietta, GA.  Wiser® Wealth Management ...

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