GDP fell in July, sparking fears of a recession and making many Americans fearful for their financial future. That fear can even lead some to stop investing altogether, or to panic and sell the current stock.
But it shouldn’t.
For novice investors who may be apprehensive of the current market, the “Wolfette of Wall Street” Lauren Simmons shares some advice to try: ignore how you’re feeling.
“Warren Buffett says you should never invest with emotions,” the 28-year-old told CNBC Make It. “So if you’re investing out of fear or really excited and you’re chasing something, no.”
Buffett, investment legend and CEO of Berkshire Hathaway, does not allow current events or the news to influence his investment decisions, he said in CNBC’s “Squawk Box” in 2018. Whatever happens, “we will buy the same stock today that we bought last week.” ,” he said.
Changing your investments based on emotion goes against investing for the long term. Once you’ve found a company worth investing in, stick with it. “If you’re not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes,” Buffett said in his 1996 shareholder letter.
Simmons agrees. “Long-term investing always holds up,” she says. “We don’t have to look at the stock market every day. It’s like watching paint dry and having a heart attack.”
It’s also important to learn as much as you can before investing, says Simmons, who became the youngest full-time female trader on Wall Street at age 22 and is on track to make $1 million this year.
“You won’t miss an opportunity if you don’t invest today,” she says. “Really take the time to invest.” Simmons herself took two years to figure out what kind of investor she wanted to be.
Simmons also emphasizes the importance of understanding your risk tolerance. If you have a high risk tolerance, it might be good to invest in speculative assets like crypto, Simmons explains, while a more conservative investor might stick with putting money in savings accounts despite low interest rates.
Most investors will fall somewhere in between and invest in a mix of bonds and stocks, based on their individual goals.
If you are not in a good financial situation to invest, then of course you are waiting. If you don’t have savings or have ongoing debt, “please don’t invest your money,” Simmons says. “Take it [your] time. Educate, educate, educate – and then invest.”
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