Slow down when markets move too fast; make the profits last
NEW YORK (AP) — When every investment around the world seems to be flourishing, it’s easy to get swept up in the excitement of making a quick buck.
Did you see bitcoin has roughly doubled in 2021? And GameStop is up more than 750%? Even vanilla S&P 500 index funds are coming off their best 12-month run since before World War II.
Regular investors have wholeheartedly jumped in, and they’re trading furiously on apps that let them buy and sell stocks easily and for free.
But it’s when everything seems stuck in fast-forward that many market watchers stress stocks are best thought of as investments to be held for a long, long time. For as boring as it sounds, holding an S&P 500 index fund for 10 years has almost always been a winner historically. Holding one for a day, meanwhile, gives nearly a coin flip’s chance at losing money, according to BofA Global Research.
Jack Brennan, who was CEO of fund giant Vanguard from 1996 to 2008, recently co-wrote a book that stresses the importance of taking the long view and keeping portfolios diversified with a mix of investments to lower risk. He talked recently with The Associated Press about “More Straight Talk on Investing: Lessons for a Lifetime.” This interview has been edited for length and clarity.
Q: While you were Vanguard’s CEO, you saw two horrible bubbles pop in the stock market. Are we in one now?
A: I think the bubble risk is out at the margins, not at the core. If you think about housing in 2007-08 or the dot-com phenomenon, which inflated a lot of the broad aspects of the market, that was different.
If you think about SPACs and their total market value, it’s not that big. Bitcoin is not that big. But it abets the idea that trading is easy. It’s those kinds of things that provided the motivation to write the...
