At 88 years old, Jack Bogle has been around for quite some time. Being a seasoned market participant, Jack has some wise words that we should all pay heed to.
Market volatility is the friend of traders and speculators. For the investor, it is just simply noise. Do you really think the values of companies are changing minute by minute?
An investor (versus a trader or a speculator) should only look at volatility as a way to build an initial position, when volatility takes the market down, and as a way to sell, when volatility takes the market up and you need to sell. If you have picked your firms based upon financial fundamentals, selling should be an infrequent occurrence (years, not minutes, days, months, quarters).
Another point to think about, Jack has seen the market drop 50% from its high value two times in his life time. Munger has said this also. You always should be prepared for a large drop as an investor. It may not fall that much in your investment lifetime, but if you are mentally prepared for the possibility, you are in a stronger mental state to deal with it. Your safety net should be that you picked quality companies with long term positive fundamentals and you have some cash to “pick up bargains”.
Take a look at the video. It is a short clip that you should pay attention to!
