President Trump’s chief economic advisor, Gary Cohn, tendered his resignation from the White House on Tuesday, leading the Dow Jones to plummet by roughly 189 points after its already-bearish opening of 300 points down. However, adverse market shifts like this are not uncommon anymore; any news – whether economic or political – can carry drastic changes to markets, often giving investors reason to panic. Ray Dalio and Warren Buffett – two of Wall Street’s most prominent investors – agree that in conditions like this, nothing works better than keeping calm and composed.
Warren Buffett, CEO of Berkshire Hathaway, accentuated that having the patience to make long-term investments is integral in receiving a high return, and stated that cash is made in markets by contributing and by owning viable, sustainable organizations for a long period of time. He believes:
“Try not to watch the market intently. In the event that they’re attempting to purchase and offer stocks, and stress when they go down a smidgen … and figure they ought to possibly offer them when they go up, they’re not going to have great outcomes.”
Ray Dalio, the founder of Bridgewater Associates, is a notable hedge fund manager and author on Wall Street, worth an estimated $14.6 billion. Dalio agrees that in times like this, the least sound strategy is giving into your fears. It can be enticing to sell when the market begins to drop, but Dalio suggests resisting this temptation and looking at the situation objectively and over a longer term. He asserts:
“You’ve got to do the opposite. It’s when you’re not scared you probably want to sell, and when you are scared, you probably want to buy.”
Both figures would agree that the objective isn’t to anticipate the direction of the markets in the future, but to learn to stay calm and capitalize on the opportunities presented today.
“Though markets are generally rational, they occasionally do crazy things, seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.”