Markets fluctuate, headlines get louder, and long-term investors suddenly start acting like day traders. This tension falls directly on Dave Ramseydesk while co-hosting a segment on “The Ramsay Show” george carmel Two questions were asked that sounded different but pointed to the same fear.
One caller asked what the market might do in the current conflict with Iran. Another person wonders if it’s time to change her daughter’s 529 plan before she goes off to college. Kamal made it very clear. Should investors make changes now as global uncertainty persists?
Ramsay didn’t hesitate. “No,” he said. “You shouldn’t change anything.”
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Ramsey’s answer was not based on speculation. It relies on patterns that have been played out again and again. Global events can shake up markets in the short term, but long-term trends tend to persist.
“If you look back at history, whenever there’s volatility in the geopolitical world, markets can go down briefly,” Ramsey said, sometimes for a day or two. Sometimes it takes several weeks.
Then there’s the analogy. “Those who ride roller coasters are only injured if they jump off mid-ride.”
To be specific, Ramsey mentioned COVID-19. Markets fell sharply as shutdowns were implemented across the world. But recovery didn’t take years. “Fifty-seven days later, it’s back to where it started,” he said.
Recent tensions have followed a similar script. Fall, then rebound. “It’s been a week or two. It’s recovered,” Ramsey said, noting that at the time of recording, the market was essentially flat for the year.
His warning was direct. Reacting to headlines can quietly undermine a strategy. “If you jump in or out every time you see a negative story on CNN or Fox, you’ll never stay invested and you’ll never make money,” he said.
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Ramsay then delved into what he believed to be the real issue. It’s not volatility. This is impatience.
“You should never put money in a mutual fund that you’re going to sit around for a week,” he says. Less than a month. Not even six months.
The threshold of his concern is clear. “You should never put money into a mutual fund unless you plan to leave it alone for three to five years.”
That window changed everything. During this period, short-term shocks tend to subside. “In three to five years, all of these issues that drove the market down will be a distant memory,” Ramsey said. “All you see is a generally upward trend line.”
In other words, time does the heavy lifting. The longer the horizon, the less important each heading becomes.
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Carmel went on to point out what usually goes wrong. “Time in the market trumps timing the market,” he said.
He went through the cycle. Investors get nervous and sell during declines. Then they wait for clarity before returning. By then, prices had climbed.
“What you’re really trying to do is sell low and buy high because you don’t know when the bottom is coming,” Carmel said.
He added a key detail. “The best days usually follow the worst days.” Miss these rallies and long-term returns take a hit.
Kamal made it clear that neither he nor Ramsey would make adjustments in light of current events. “We are not changing our investment strategy at all,” he said.
Ramsey ends the college savings issue with a practical reminder. Even with tuition coming up, the 529 balance won’t be used up right away. “You just take out enough money to cover your expenses for that year,” he said.
This way the remaining money can be invested and given time to recover and grow. If history holds true, today’s uncertainty will not determine the outcome. Long term charts will.
Ramsey’s advice emphasizes the value of staying invested and thinking long-term. Diversified ETFs, such as those offered by Direxion, can help investors maintain exposure to broad market trends without having to react to every short-term headline.
Read next: These common ETF pitfalls can catch new investors off guard, experts say
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Never put money in mutual funds unless you plan to leave it for 5 years, says Dave Ramsey — ‘All you’ll see is a generally upward trend line’ Originally published on Benzinga.com
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