It has been an incredible year on Wall Street so far, but uncertainty is finally starting to rise as tensions between North Korea and the United States continue to increase. This new geopolitical drama is certain to cause nervousness around the global markets, but luckily, investors have plenty of resources for putting together a winning strategy during rocky times.
Of course, these strategies have been all but forgotten recently. Prior to President Trump’s ominous warning that North Korea would be met with “fire and fury like the world has never seen” if it continued to threaten the U.S., the Dow had finished in the green 10 days in a row—including nine straight all-time highs.
And while it seems that a full-scale war between the U.S. and North Korea is unlikely, the verbal jousting over the past few days has reminded investors that not everything is sunshine and rainbows around the world.
So how should investors react if tensions continue to rise? What is the best course of action for investing during uncertain times? In this week’s edition of Wednesday Wisdom, we’ll take a look a three quotes from a few of the most famous investors in history in order to find answers to these questions.
This quote actually continues, with Peter Lynch, widely regarded as one of the best mutual fund managers ever, adding that “If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.”
This is a great thing to recall during these one-day fluctuations caused by public comments. If you are prone to selling immediately in these moments, you must remember that making money on stocks requires a much cooler head than that.
In a similar vein, John Bogle, founder of investment management behemoth The Vanguard Group, reminds us that downturns can sometimes be more dramatic and prolonged. Although the current bull market has charged along for quite some time, another bear market is guaranteed to happen again eventually.
A 20% or more decline over the course of two or more months is typically the threshold for declaring a bear market. If you are brand new to investing, you may have never experienced a bear market, and if you started buying stocks after the 2008 crisis, you’ve certainly never dealt with a major one. But they do happen. They are an inherent risk. Don’t play the game without knowing that.
Our final piece of advice here is incredibly important to consider when we look at price movements that are coming as a result of breaking news. Arthur Zeikel, a longtime chairman at Merrill Lynch, teaches us regular folk that someone else will likely know something important long before we do.
Want more advice from the investing greats? Check out the last edition of Wednesday Wisdom, How Mark Zuckerberg Teaches Us To Be Better Investors, and remember to check back here next week!
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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