Larry Swedroe, Head of Financial and Economic Research at Buckingham Strategic Wealth, discusses navigating market volatility, the folly of predicting crashes, emotional investment decisions, and long-term investment challenges in a volatile market with Barry Ritholtz
Staying disciplined during market fluctuations is crucial for long-term investment success.
Avoid emotional reactions, stick to a well-defined investment plan, and understand the inherent risks in investing.
Deep dives
The Importance of Long-Term Investing
Long-term investing is simple but not easy. Markets experience frequent fluctuations, and investors often panic during downturns, leading to underperformance. It is crucial to have a plan, stick with it, and avoid reacting impulsively to market movements. Studies show that consistent long-term investments outperform frequent trading strategies.
Challenges in Staying the Course
Investors face challenges like recency bias, where recent trends drive investment decisions. Failure to understand the long-term nature of investing can lead to premature reactions. Historical data reveals that most assets can have extended periods of underperformance but eventually recover. Staying calm during market fluctuations is key to investment success.
Managing Fear and Greed
Investors are prone to emotional reactions driven by fear and greed. Having a well-defined investment plan helps avoid impulsive decisions during market volatility. Understanding and accepting the inherent risks in investing is essential. It is crucial to stay disciplined, rebalance portfolios, and avoid making decisions based on short-term trends or emotions.
Markets go up and down as news breaks, companies miss earnings estimates, and economic data disappoints. It's not too hard to see why staying the course can be a challenge for investors. Larry Swedroe, Head of Financial and Economic Research at Buckingham Strategic Wealth, which manages or advises on $70 Billion in client assets, speaks with Barry Ritholtz about the best ways to navigate through this sea of noise and stay the course.